Cryptocurrency markets are experiencing increased volatility triggered by U.S. data. Employment data pressures the Fed into rate cuts, yet there are discrepancies in labor force data.
U.S. Labor Force Data
This week, inflation data will be released with less than 24 hours remaining. Employment data largely favored risk markets, prompting Powell to signal rate cuts in last month’s Jackson Hole speech. Data source The Kobeissi Letter addressed the imbalance in labor force data. After identifying the issues, they listed their reasons: * Response rates to key labor market surveys are at historic lows. * The current employment survey, also known as non-farm payrolls, dropped from a 63% response rate in 2012 to 20% this year. * The unemployment rate survey’s response rate fell from 90% in 2012 to 70%. * The job openings survey’s response rate decreased from approximately 65% twelve years ago to 33%. According to this, the BLS (Bureau of Labor Statistics) now publishes results with fewer responses than in the past, revising incomplete data. This explains significant downward revisions in recent years. Employment figures until March 2024 were revised down by 818,000 for the 12-month period. Therefore, discrepancies in survey-based data are understandable and future revisions might be even more disparate.
Fed Rate Cuts
If labor force data is lagging and the potential for downward revisions is strong, the Fed’s slow pace in easing based on this data could be erroneous. Analysts discussing different inflation details have raised these discussions in recent months. However, recent surveys suggest economists’ expectations for rate cuts are not as strong as assumed. * 54 out of 71 economists believe the Fed is unlikely to cut rates by 50 basis points in any of the three remaining meetings this year. * 65 out of 95 economists predict the Fed will cut rates by 25 basis points three times this year. * 92 out of 101 economists expect the Fed to cut the rate by 25 basis points to the 5.00%-5.25% range on September 18, while 9 foresee a 50 basis point cut.
Conclusions and Potential Outcomes
In summary, if the Fed acts according to market expectations, a delayed risk market rise with slower easing is likely to occur.
U.S. employment data continues to raise questions among analysts and has a significant impact on the Fed’s decisions. Further revisions may lead to changes in monetary policy and market reactions.
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