Nonfarm payrolls disappoint! Rate cut expectations surge, gold and bitcoin soar

Despite a hiccup before the release of the US Non-Farm Payrolls report (a malfunction in the Bureau of Labor Statistics data retrieval tool), the report was still published on schedule at 8:30 PM (UTC+8) on September 5th, Taiwan time. The data showed that the seasonally adjusted non-farm payrolls in the US for August increased by only 22,000, far below the expected 75,000; the unemployment rate for August was recorded at 4.3%, in line with expectations but marking a new high since October 2021.

At the same time, the number of new non-farm jobs added in June was revised down from 14,000 by 27,000 to -13,000; for July, the figure was revised up from 73,000 by 6,000 to 79,000. After these revisions, the combined new jobs added in June and July decreased by 21,000 compared to the previous figures.

Significant Increase in Probability of a Rate Cut in September

The latest non-farm payroll data undoubtedly confirms the weakness in the labor market. After the report was released, the market's expectation that the Federal Reserve will resume rate cuts and cut rates by 25 basis points at this month's FOMC meeting rose to 98.1%, making it almost a certainty. The probability of a double rate cut in September also emerged, rising from 0 to 1.9%.

Meanwhile, the market has also increased its bets on Fed rate cuts in October and December. According to the CME Fed Watch tool, after a 25 basis point cut in September, the probability of another rate cut in October has already reached 78%, a significant increase from 53.6% the previous day.

Rising Probability of Economic Recession

However, it is worth noting that although the Fed appears poised to resume rate cuts, economists have previously pointed out that the unexpectedly weak performance of the labor market has also heightened concerns about a potential economic recession.

Against this backdrop, after the release of the non-farm report, the spot price of gold climbed again to $3,587, setting a new historical record, indicating that market risk aversion sentiment continues to rise.

Volatility in the Crypto Market

After the report was released, the cryptocurrency market experienced significant volatility. There was intense long-short competition immediately after the data was published, followed by a period of choppy trading. At the time of writing, bitcoin was trading at $112,423, up 2.7% in the past 24 hours (UTC+8); ethereum was trading at $4,425, up 2.8% in the past 24 hours (UTC+8).