The last and most important non-agricultural data before the September FOMC meeting directly determines whether the "recession panic" will intensify and whether the Fed will cut interest rates by 25bp or 50bp two weeks later. However, the results didn't completely meet the expectations of both the optimists and the pessimists. It wasn't great, but there wasn't a direct bombshell to make a 50bp rate cut a certainty.

1. The downside: New job additions were 0.142 million, lower than expected 0.165 million, and downgraded from 0.114 million to 0.089 million last month.

2. The not-so-bad side: Temporary unemployment decreased by 0.19 million, basically making up for the increase of 0.249 million last month. Combined with household survey-based new employment additions of 0.168 million people, the unemployment rate decreased from 4.3% to 4.2%. Wages rose compared to the previous month (0.4% month-on-month, expected 0.3%, previous value 0.2%; 3.8% year-on-year, expected 3.7%, previous value 3.6%), which is a slight recovery.

As for the frequent downward revision of the data, we can only assume that monthly employment data is difficult to accurately statistics as they are all survey data that requires more time to confirm, especially when there are many temporary factors. And this applies to all market participants as well, because once we start assuming data quality issues, the discussion becomes unclear.

So after the data was released, various assets were in a state of indecision and there was a divergence in trends. Currently, it seems to be heading towards a consensus that is not so bad, with US stocks rising, gold falling, and the US dollar and US bond yields rebounding.

From the perspective of rate cuts, this data is actually giving the Federal Reserve some breathing room. Just imagine, if it greatly exceeded expectations, would the 25 basis point rate cut need to be revised? If it fell far below expectations, forcing a 50 basis point rate cut, the market could become even more panicked. So as of now, the expectations for a 25 basis point and 50 basis point rate cut in September are evenly split, and the conclusion may need to wait for next week's CPI. We still lean towards a 25 basis point cut, unless absolutely necessary, otherwise it would actually reinforce recession concerns.

For assets, the impact of this data is similar, with not much additional information on recession and rate cuts. Currently, the market is in a chaotic phase of slowing growth and unclear policy effects. The slowdown is evident, but the effects of policies have not yet been seen. It's not so extremely pessimistic, nor has any good signs been seen, so volatility and indecision in this phase are inevitable (reference can be made to the experience before the rate cut in July 2019), coupled with the second round of debates on September 10th and the rate cut on September 19th.

For US bonds and gold, they still benefit from the rate cut, but since expectations have been priced in fully, unless there is additional evidence of greater recession risk and rate cut intensity, linear extrapolation is not significant. After the rate cut, the economy may drive the repair of rate-sensitive sectors, so it should gradually consider assets that may benefit after the rate cut. This is the main significance of our recommendation to think and act moderately the other way around.

Editor/new