Wall Street comments on non-farm payrolls: Data significantly revised downwards to strengthen the recognition of weak employment, but the rate of interest rate cut in September is still undetermined

The U.S. Bureau of Labor Statistics released data on Friday, showing that non-farm payrolls increased by 142,000 in August, falling short of the expected 165,000. The July data was significantly revised down from 114,000 to 89,000, and the June data was revised down by 61,000. The unemployment rate dropped from 4.3% in July to 4.2%, meeting expectations, marking the first decline since March this year.

Wall Street analysts generally believe that the weaker-than-expected non-farm payroll data in August, especially the significant downward revisions in the previous two months, have reinforced the perception of a weak labor market. However, the extent of the rate cut by the Federal Reserve in September remains controversial.

Helen Given, a forex trader at Monex, stated that the August employment report is not "clearly good or bad," and she believes that the Fed will cut rates by 25 basis points in September, with no more than 75 basis points for the remainder of the year.

"Overnight swap rates have risen due to calls for a 50 basis point rate hike, but in our view, the Fed still does not have enough room or reason to justify the rationality of this action."

Krishna Guha from Evercore ISI commented,

"This report is in a gray area, but may not be sufficient to prompt a 50 basis point rate cut."

Ali Jaffery, an economist at CIBC Capital Markets, mentioned that whether there will be a 25 or 50 basis point rate cut will depend on the statements of Fed officials.

"There are many mixed factors in today's report, leaving the Fed's decision hanging, and the upcoming statements from Fed officials will provide us with some clues on how they interpret today's report."

Childe-Freeman from Bloomberg stated that once the revised data from the previous months is considered, the clear weakness in U.S. employment data is confirmed, but the decline in the unemployment rate brings some relief.

"In the debate between a 25 basis point and a 50 basis point rate cut, there is no clear, convincing reason, but this will not prevent a more bearish outlook on the dollar driven by cyclical factors. Whether the Fed starts with 25 basis points or 50 basis points, it will not change this."

Gennadiy Goldberg, head of U.S. rate strategy at TD Securities, said:

"I think the market is really struggling with this issue because it is in a middle ground that can be used as a rationale for both a 25 basis point rate cut and a 50 basis point rate cut.

"This aligns with expectations for a rate cut in September. The biggest question now is how much will the rate cut be? I think this is where the market is currently confused. Is this data weak enough to support a 50 basis point rate cut in September? If you believe the Fed is more proactive, then yes. If you think they will take a more cautious approach, then no. But regardless, I think the market will be in a very delicate balance until the Fed clearly signals whether it will be 25 basis points or 50 basis points, and this is indeed a difficult decision.

"If you look at the adjusted employment report, the performance is not ideal, especially considering the downward revision of 86,000 in the past two months. So I think the unemployment rate is key, but this does not indicate a very strong labor market." "We do see the labor market not just achieving balance, but starting to cool significantly, which may make the Federal Reserve very uneasy."

Jeffrey Rosenberg, Senior Portfolio Manager at BlackRock, said,

"If the Fed cuts rates by 50 basis points this month, it may signal concerns about the economy rather than conveying a signal for policymakers to take timely action to avoid a recession."

Torsten Slok, Chief Economist at Apollo, stated that the overall data shows better improvement than in July.

"This report is better than the data in July, the economy is not slowing down as much as the market expected. We will not see 8 rate cuts in the next 12 months."

Lou Basenese, President and Chief Market Strategist at MDB Capital, said that a 25 basis point rate cut is a minimum, and if the stock market continues to decline, a 50 basis point cut may be possible:

"Everything is going down. You see lower-than-expected job growth data, and the data for the past two months has been revised down, which means rates have to come down. Powell had no choice. What needs to be determined is whether he cut rates in time, or if he was too late. I think so far, he's been timely. You haven't seen massive layoffs yet. But if we start to see layoffs in the next month or two, that would indicate he acted too late.

"Stocks will continue to decline until the Fed clearly announces next week that they will cut rates, which may put more pressure on them to cut by 50 basis points instead of 25. I think 25 basis points is almost certain. But the downward pressure on stocks before the meeting may prompt the Fed to make a 50 basis point rate cut decision."