US markets are set for a shortened trading week as Wall Street returns from the Labor Day holiday on Tuesday.
Despite the quiet start, investors will have plenty to digest, with the highlight arriving on Friday in the form of the August nonfarm payrolls report.
The jobs data will be the main event of the week, according to Kathleen Brooks, research director at XTB.
“The US labor market report is always the highlight of the economic calendar at the start of the month,” Brooks wrote. “The August report will be even more important than usual since it is the last report before the September Federal Reserve meeting.”
Markets currently price in a high likelihood of a rate cut when policymakers meet on September 17.
After July’s weaker-than-expected payrolls and historic downward revisions to May and June, traders will be watching closely for signs of further softening.
Consensus expectations call for around 75,000 to 100,000 new jobs in August, with the unemployment rate edging up to 4.3% from 4.2%. Average hourly earnings are projected to ease slightly.
“A weak report will solidify expectations of a cut from the Fed even more, while a stronger-than-expected report could trigger a recalibration of the market’s expectations for interest rates,” Brooks wrote.
Deutsche Bank analysts share that view. “Friday’s employment report will undoubtedly be the focus for both market participants and the Fed,” they wrote.
The bank is forecasting headline payrolls to improve modestly from July, with private payrolls rising by about 100,000. That would be “a still healthy level supportive of consumer spending,” they added.
Beyond Friday’s jobs report, markets will parse a string of labor-related releases. Tuesday brings July JOLTS job openings, Wednesday features ADP’s private employment survey, and weekly jobless claims arrive Thursday.
These reports will help shape expectations ahead of the Fed’s September meeting, where officials remain split between concerns over persistent inflation and signs of labor market cooling.
Earnings continue to roll in, with Salesforce and Broadcom among the major companies reporting quarterly results this week.
But the spotlight will remain on the labor market, as investors weigh whether September’s historic reputation as a tough month for equities will hold true.