If steady:
Thursday’s jobless claims held steady from the prior week, which is welcome news given the recent deluge of softening labor market data. On the eve of Jerome Powell’s closely watched commentary in Jackson Hole, investors are looking for assurance from Powell that a rate cut is likely at the September meeting, in order to help prevent any further weakening of the labor market.
If strong:
Thursday’s jobless claims data was stronger-than-expected, which is yet another data point suggesting that there are cracks beginning to form in the labor market. On the eve of Jerome Powell’s closely watched commentary in Jackson Hole, investors are looking for assurance from Powell that a rate cut is likely at the September meeting, in order to help prevent any further weakening of the labor market.
Broader:
Stock valuations are very elevated right now heading into Jackson Hole, and investors have very high expectations that Powell will hint at a September rate cut. Anything short of that could push investors to take some chips off of the table, especially given lighter August trading volume and a reluctance for risk heading into a weekend.
While we may see a market pullback if Powell throws cold water on the idea of a September rate cut, we believe rate cuts are on the horizon at some point in the next 12-months.
While investors are focused on Jackson Hole, we would argue that the August jobs report, released in early September, is actually more important for the Fed’s rate cut decision. It’s the last jobs report before the September meeting and the headline number and any revisions to the prior months will be scrutinized by central banks and investors alike.
