US jobs report
The Department of Labor is scheduled to release the September figures for the US (VTI) employment situation on October 5. For the past few months, the financial markets have been reacting sharply to the US jobs report numbers. The numbers give clues regarding the future of the monetary policy followed by the Fed. Therefore, investors should understand the expectations for the report before the actual numbers come out.
Expectations versus reality
The September job report comes after the Fed raised the rates by 25 basis points. The Fed’s next meeting is scheduled for December. While market participants are estimating another rate hike by 25 basis points in December, US economic data, especially for inflation and jobs, will likely help decide the future course.
The most closely watched and market-moving component of the jobs report is wage growth. If wage growth rises more than expected, it could spark speculation that the central bank will move more aggressively along the rate hike path, which has previously led to sell-offs in some stock categories.
Jobs report and equity markets
In January, wages rose the most since the recession. Later, the figure was revised downward. US markets fell due to expectations of more aggressive rate hikes by the Fed to control inflation. The S&P 500 Index (SPY) fell 6.2% in the two days following the jobs report, while the Dow Jones Industrial Average Index (DIA) and the NASDAQ Composite Index (QQQ) fell 7.1% and 5.9%, respectively.
A faster-than-expected rate hike pace could be detrimental to gold (GLD) demand. Gold generally loses its appeal against interest-bearing assets.
In the next part of this series, we’ll see how the wage growth could progress going forward.