Inside Markets — Risk of Hot Jobs Report

August liquidity conditions typically spill into the first week of September as market participants slowly return from vacation. Thin liquidity tends to magnify the significance of major catalysts like Friday’s Jobs Report. Markets are priced for a September rate cut, so a hot non-farm payroll report may carry higher risk vs. a weak repot. Consensus is currently looking for non-farm payrolls of +85,000, up from July’s weaker-than-expected fain of +73,000 jobs. In our view, markets would begin to unwind expectations for a September rate cut on a payroll gain greater than +175,000. Unwinding September rate cut expectations would likely take ~5% out of the SPX.