If we were to discuss the most important overseas macroeconomic data this week, the US September non-farm employment data to be released at 20:30 tonight Beijing time would definitely be the focus.

In fact, we have previously introduced that before the results of the US elections in November are announced, the US stock market will face the following tests (all in local time):

US September non-farm payrolls on October 4th, Fed minutes on October 9th, US September CPI on October 10th, US September PPI on October 11th / University of Michigan Consumer Confidence Index, US September retail sales data on October 17th, seven major tech companies' financial reports intensively released from October 21st to 25th, and US October non-farm payrolls on November 1st.

According tooptions pricingOn the above two 'non-farm nights', the volatility of the US stock market is likely to be the greatest!

From the perspective of the global view, although the recent rise of Chinese assets is unstoppable, if more overseas markets can rise simultaneously, undoubtedly it is expected to further enhance the optimistic sentiment of the domestic stock market after the festival. At the same time, this important US macro data is bound to further influence the performance of the forex, bonds, and commodity markets. Marc Chandler, Chief Market Strategist at Bannockburn Global Forex LLC, pointed out that the most important content of the forex market this week is the September non-farm payroll data to be released by the United States.

It is worth mentioning that Friday's non-farm data may also be the last 'normal' employment report in the near future. Because the non-farm data in October is likely to be significantly distorted by three major events: the destruction caused by Hurricane 'Helen', the ongoing Boeing machinist strike, and the massive strikes recently occurred on the East Coast of the United States and along the Gulf of Mexico. These phase-out events are likely to affect people's assessment of the true situation of the US labor market.

Therefore, although there are still two non-farm reports before the Fed's decision in November, the data from this week may be the only one that truly provides accurate reference for the Fed.

So, although there are two non-farms before the Fed decision in November, perhaps only this week's data can provide precise reference for the Fed.

So what will be the performance of this key employment indicator tonight, which is expected to determine the pace of the Fed's future rate cuts? Let's watch together.

Outlook: How is the market expected before the non-farm payrolls?

According to the schedule, the US Department of Labor will announce the non-farm employment report for September at 20:30 Beijing time tonight. According to the median expectation of economists compiled by the industry media, it is expected that the number of non-farm jobs in September will increase by 0.14 million, the unemployment rate will remain unchanged from the previous month, staying at 4.2%. In August, the US job market added 0.142 million jobs, lower than market expectations, ultimately setting the stage for the Fed to cut rates by 50 basis points in September.

The following are the latest median forecasts from Wall Street for the main indicators and key sub-indicators of non-farm employment compared to the previous month:

In September, the seasonally adjusted non-farm employment in the USA is expected to increase by 0.14 million people, with a previous value of 0.142 million people;

The unemployment rate in the USA for September is expected to be 4.2%, with a previous value of 4.2%;

The employment participation rate in the USA for September is expected to be 62.7%, with a previous value of 62.7%;

Average hourly wages in the USA for September are expected to increase by 3.8% year-on-year, with a previous value of 3.8%;

Average hourly wages in the USA for September are expected to increase by 0.3% month-on-month, with a previous value of 0.4%.

Looking at the current situation of the labor market in the USA, recruitment in the medical care industry is slowing down, which may pose a certain threat to the overall stability of the labor market. This industry has been a major driver of employment growth since 2021, however, in August, the additional employment in the medical care industry was only 30,900, the lowest level in over two years, especially notable is the significant layoffs in hospitals and nursing institutions.

Professor Ge Bai from Johns Hopkins University, specializing in health policy research, stated that the medical care industry holds a significant position in the US job market, and even minor changes can impact overall employment across the country. "In the past, the employment growth in the medical care industry may have only reflected trends under the epidemic, but now we are seeing a certain degree of decline."

Bank of America economists also wrote in a non-farm outlook report released on Tuesday: "We still expect medical, education, and government (and to a lesser extent leisure and hotel industry) to continue driving job growth. However, we also note that recent data shows that the growth of these 'catch-up' industries is slowing down as they approach pre-epidemic trends."

Of course, looking at some leading indicators that were released before the non-farm data, it is obvious that people are not only receiving bearish news at the moment. At least the small non-farm ADP exceeding expectations may help to add a bit of confidence to tonight's non-farm data. Data released by the U.S. automated data processing company on Tuesday showed that the U.S. September ADP employment figure was 0.143 million people, higher than the expected 0.12 million people, with the previous value revised from 0.099 million people to 0.103 million people.

Chris LaRicca, a strategist at Morgan Stanley, said, "ADP employment data unexpectedly rose, indicating that the labor market is bending but not collapsing. The non-farm employment report on Friday will make the final judgment on the current employment situation and recent market sentiment."

A report released by the U.S. Department of Labor on Tuesday also showed that U.S. August JOLTS job vacancies unexpectedly climbed to a three-month high, exceeding economists' expectations. The data also indicates that despite the overall slowdown in U.S. employment growth, it remains basically stable, consistent with the trend reflected in the latest small non-farm ADP data.

How will non-farm data affect rate cut expectations and financial markets?

On Monday local time, Federal Reserve Chairman Powell said at the national business economic association annual meeting held in Nashville that the Fed is not in a hurry to cut rates quickly, but will make decisions based on data.

In fact, this is equivalent to once again placing the key to determining the pace of the Fed's rate cuts on a series of key employment indicators including non-farm employment – Clearly, compared to inflation data, the Fed currently pays more attention to employment indicators.

Powell also said that day, "The U.S. labor market is strong, but the situation has 'clearly cooled in the past year', we believe that a further cooling of the labor market is not necessary to achieve the 2% inflation target."

In response, Kallum Pickering, Chief Economist at Peel Hunt, expressed in an interview, "I will certainly be nervous before the release of the employment report on Friday. If the unemployment rate rises, I would not be surprised if the market reverts to expecting a 50 basis point cut, then it's a question of how the Fed might react."

Stephanie Roth, Chief Economist at Wolf Research, also pointed out that the upcoming non-farm payroll data will be particularly important for the Fed's decision on the next rate cut. "Our base expectation is that the employment numbers will be slightly better than market expectations," she explained, expecting the addition of at least 0.12 million to 0.13 million new jobs. If the data falls below this threshold, she believes the Fed may cut rates by another 50 basis points. Similarly, if the unemployment rate rises to 4.3%, the Fed may opt for a larger rate cut.

However, Chandler from Benockben has a slightly different view on tonight's non-farm payroll. He stated that a total of 50 basis points rate cut at the Fed's two remaining monetary policy meetings this year would be the baseline scenario. Unless the employment data is surprisingly weak, i.e., monthly new non-farm payrolls fall below 0.1 million or the unemployment rate increases, only then would the Fed implement a larger rate cut.

Regarding market impact, JPMorgan believes that for the stock market, the best scenario would be the employment report on Friday slightly exceeding market consensus.

JPMorgan's Chief U.S. Economist, Michael Feroli, expects an addition of 0.125 million new non-farm payroll jobs in September. JPMorgan's traders have also analyzed how the stock market will react after the employment report is released on Friday at 8:30 am Eastern Time based on several different scenarios.

Here are JPMorgan's five scenarios predicting post-non-farm market performance:

Addition of over 0.2 million new non-farm payroll jobs: S&P 500 index is expected to remain flat to rise 0.5%.

JPMorgan states that a strong employment report will indicate "(the U.S.) economy is back on track after a soft summer," leading some investors to speculate that the Fed may skip a rate cut in the November meeting (no cut in November, cut again in December).

Non-farm payroll numbers between 0.16 million and 0.2 million: the s&p 500 index is expected to rise by 1%-1.5%

Morgan Stanley traders view the non-farm payroll numbers falling within this range as the 'blonde girl scenario,' because this would indicate higher growth achieved by the economy without reigniting inflation. In this scenario, the market is most likely to expect the Fed to cut rates by 25 basis points at the next meeting in November.

Non-farm payroll numbers between 0.14 million and 0.16 million: the s&p 500 index is expected to rise by 0.75%-1.25%

If the non-farm data falls within this range, it will meet the consistent expectations of market participants and still be within JPMorgan's 'blonde girl scenario,' where the economy continues to grow at a pace that supports corporate profit expectations without reigniting inflation. However, the employment growth within this range is still insufficient to alleviate investors' concerns about a potential economic downturn.

Non-farm payroll numbers between 0.11 million and 0.14 million: the s&p 500 index is expected to decline by 0.5%-1.5%

If employment numbers fall within this range, it is likely to reignite concerns about economic growth and trigger market narratives criticizing the Fed for being behind the curve and reacting too slowly to the emerging economic downturn. In this scenario, defensive assets will perform well, and treasury yields will decline.

Non-farm payroll numbers below 0.11 million: the s&p 500 index is expected to decline by 1.25%-2%

JPMorgan believes that since non-farm payrolls typically turn lower before an economic slowdown, this situation may suggest that the earliest economic recession could begin in the fourth quarter of 2024. Credit assets will outperform the market, while traders will unwind bullish cyclical and value trades.

Editor/Somer