New Delhi: Stock markets turned cautious ahead of the release of US weekly unemployment report and Farmroll data. These two data points hold importance as the world counts down the days to the US Federal Reserve’s next FOMC meeting, in which the US central bank is widely expected to slash the policy rate for the first time in nearly 2 years.
US Fed chair Jerome Powell in his Jackson Hole speech last month decisively said that it was time to cut the policy rate since inflation was largely under control.
Why unemployment rates are cause for concern
The US Labor Department’s jobs update will be widely anticipated as setting the tone for the US Fed’s rate cut decision. While the US Fed has forecasted a soft landing for the US economy as the rate hikes were expected to slwo down economic growth and cool down the jobs market, a higher-than-expected jobs decline is expected to spook markets, stoking widespread fears of a recession.
It does not help that these economic uncertainties may feed directly into the politics of the day with the US Presidential elections being months away in November 2024. The August jobs report showed that unemployment spiked to 4.3 per cent in July 2024 from 3.4 per cent in April 2024. The Friday jobs report is expected to show a nearly flat unemployment rate of 4.2 per cent in August, according to economists, with 161,000 jobs expected to have been created in August, compared to 114,000 in July. However, the ADP payroll s processing data indicated that just 99,000 jobs were created in August compared to 114,000 jobs in July.
Month
US Jobs data
% change
January
256000
3.7
February
236000
3.9
March
310000
3.8
April
108000
3.9
May
216000
4
June
179000
4.1
July
114000
4.3
Impact of US jobs data on Sensex and Nifty
while the Sensex and Nifty have been in red for the past few days, the performance on Friday is expected to have priced in the broader uncertainty with respect to US jobs data, officially called the US Non-Farm Payroll data. While markets were looking forward to rate cuts, they are now jittery about the extent of rate cuts and what they may indicate — a potential recession in the US economy, which may have ramifications for the global economy.
Indian indices took cues from their Wall Street counterparts, namely, the Dow Jones was down 220 points and the S&P 500 was down 0.3 per cent. To be sure, the Nasdaq surged 0.2 per cent on Thursday, but down from the day’s high of 1 per cent gains.
Investor wealth worth nearly Rs 4.12 lakh crore was erased early on Friday after the Sensex and Nifty underwent a massive correction. The Sensex closed at 81,183.93, down 1,017.23 points, or 1.24 per cent, while the Nifty was down 292.95 points, or 1.17 per cent to 24,852.15 on Friday.
US jobs data report expectations have created ripples in the global economy with Wall Street and Dalal Street indices closing lower owing to uncertainty over job creation and its relation to the health of the US and global economy. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
