Stock Futures Fluctuate before Job Data Release

08/10/2021

Stock futures were in a holding pattern as investors anticipated a critical report on the labor market on Friday morning at the time of publishing this post.

Contracts on the S&P 500 rose after the index gained for the third day in a row during Thursday's regular trading session. The rally occurred as Senate leaders announced a deal to raise the government's borrowing ceiling until early December, averting a default as soon as this month. The chamber voted Thursday evening to expand the debt ceiling by $480 billion, and the legislation for the short-term increase is now headed to the House of Representatives.

With fears over the government's debt ceiling receding, markets' focus has shifted to the Labor Department's next monthly jobs data. After a lackluster August print of just over 200,000 jobs created instead of the more than 700,000 projected, this report is expected to indicate an increase in employment creation.

Economists anticipate that non-agricultural payrolls increased by 500,000 in September, with the unemployment rate falling to 5.1 percent, a new pandemic-era low. Average hourly wages are predicted to have grown at a 4.6 percent year-over-year rate, the highest since February, in another print confirming inflationary forces in the U.S. economy.

Though employment has yet to recover to pre-pandemic levels, gains in the job market have accelerated as coronavirus cases continue to drop. Other data have also suggested similar developments, with new weekly unemployment claims falling to their lowest level since March 2020 on Thursday. ADP's private payrolls report earlier this week indicated 568,000 job additions in September, exceeding expectations. 

A strong employment report would also likely be enough to spark the Federal Reserve's commencement of tapering. Last month, the central bank indicated that it would withdraw some of its extremely accommodating monetary policies if the recovery progressed. In addition, Fed Chair Jerome Powell stated that a decent report on September employment would suggest that the job market had met the Fed's tapering threshold.