In the US economic calendar in the next few days, the concentration on "Fed" will be very high - the minutes of the Fed's last interest rate meeting will be released on Wednesday (early Thursday Beijing time), and Fed Chairman Powell will give a speech at the Jackson Hole Annual Meeting on Friday.

At this critical moment, Wall Street analysts are focusing on another issue - the annual adjustment in the USA.non-farm payroll datain Detail, the job data, which is seen as a sign of "resilience in the US economy," will be cut by how much.

What's going on?

At 22:00 tomorrow night, the US Bureau of Labor Statistics will release the preliminary report on the first quarter non-farm employment and wage survey (QCEW) in 2024. According to this data, the non-farm data for the past year ending in March will be adjusted.

Previously, the QCEW data published in June this year showed that the non-farm new employment data in 2023 is 0.06 million people more than QCEW on average per month. Since the QCEW data is sourced from the unemployment insurance tax records of each state and covers almost all employment positions, the accuracy of this data is far higher than that of monthly non-farm survey data, but the disadvantage is that it takes longer to be published.

For Wall Street economists, this will also be a moment to test their forecasting skills.

Economists at JPMorgan expect that this year's non-farm adjustment will probably be around 0.36 million, but Goldman Sachs and Wells Fargo expect at least 0.6 million people to be downgraded, with Goldman Sachs' upper limit forecast reaching (downgraded) 1 million people.

Assuming Goldman Sachs is right, this will also be the most serious downgrade of US non-farm in nearly 15 years, and it is likely to spark a new round of debate on whether the Fed is cutting rates too slowly.

From Goldman Sachs' perspective, the exaggeration of this prediction is also very "American" - this QCEW data also has two limitations.

First of all, the seasonal employment and wage survey data largely does not include illegal immigrants, which could result in a data downgrade of 0.3-0.5 million, but the contribution of illegal immigrants to the US employment market is obvious. Secondly, Wednesday's QCEW data is also a preliminary value, and in recent years, the final number has averaged 0.1 million higher than the preliminary value.

For this reason, Wednesday's non-farm downgrade may depict a too negative portrayal of the labor market and cause undue concern. In the 12 months ending in March 2024, non-farm employment increased by nearly 2.9 million positions, an average of 0.242 million per month. If 1 million is downgraded, the monthly employment increase data will drop to 0.158 million.

Goldman Sachs believes that the 'true' US employment data during this period is more likely to be between 0.2-0.24 million per month.

Impact: Dollar Index falls to the lowest level since January.

Affected by employment revision data and other events, the US dollar continued to weaken on Tuesday. As of press time, the dollar index has fallen to the lowest point since January 2 this year.

(USD Index Daily Chart, Source: TradingView)

In the highly anticipated Jackson Hole speech, global investors are waiting for Powell to provide guidance on the future rate cuts. If there really is a situation of 'US non-farm data being slashed by millions', compared to the current market's celebration of a 'soft landing of the US economy', Powell's wording may trigger a different trading rhythm.

Currently, economists and swaps markets generally expect the Fed to cut interest rates by 25 basis points in September, and the remaining two meetings this year will also cut interest rates by 25 basis points each.

Marc Chandler, chief market economist at Bannockburn Global Forex, said that people used to think that the Fed was slow to act on rate hikes, and now many people think they are slow to cut rates. So this is why Chandler still keeps the possibility of a 50 basis point rate cut in September.

Editor/Emily