- The BLS will release the preliminary benchmark revision to employment data on Tuesday.
- Markets widely expect the Fed to lower the policy rate multiple times this year.
- Standard Chartered analysts think the Fed could opt for a 50 bps rate cut next week.
The United States (US) Bureau of Labor Statistics (BLS) will publish the 2025 preliminary benchmark revision to the Establishment Survey Data on Tuesday, September 9.
The preliminary revision will cover the 12-month period through March 2025 before the final benchmark revision is reported within the employment report of February 2026.
“Official establishment survey estimates are not updated based on this preliminary benchmark revision. The final benchmark revision will be incorporated into official estimates with the publication of the January 2026 Employment Situation news release in February 2026,” the BLS notes.
When the BLS released the preliminary annual benchmark revisions in August 2024, it noted that the US economy created 818,000 fewer jobs than originally reported in the 12-month period through March 2024. This translated into an actual job growth of 30% less than initially outlined for this period.
In response, the Federal Reserve (Fed) lowered the policy rate by 50 basis points (bps) in September 2024, bringing the fed funds rate to 5% from 5.5%.
US labor market cools down
The latest employment report showed that Nonfarm Payrolls (NFP) rose by 22,000 in August. This reading followed the 79,000 increase (revised from 73,000) recorded in July and missed the market expectation of 75,000 by a wide margin. The BLS also noted that it revised down June’s NFP by 27,000, from 14,000 to -13,000. This follows a significant negative revision to May NFP growth, from 144,000 to 19,000, reported in July’s jobs data.
While speaking at the annual Jackson Hole Economic Symposium on August 22, Fed Chair Jerome Powell acknowledged that downside risks to the labor market were rising and noted that tighter immigration policy has led to an “abrupt slowdown” in labor force growth.
According to the CME FedWatch Tool, the probability of the Fed lowering the policy rate by at least a total of 75 bps this year, by opting for 25 bps cuts at each of the three remaining meetings, climbed to nearly 75% from about 40% before the release of the jobs data.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
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Is there room for a jumbo Fed rate cut next week?
In case the preliminary benchmark revision suggests that conditions in the US labor market were even worse than thought, markets could see this as a development that opens the door for a dovish Fed move at the upcoming policy meeting.
Steve Englander, Head of Global G10 FX Research and North America Macro Strategy at Standard Chartered, noted that the Fed could go for a ‘catch-up’ 50 bps rate cut at the September meeting, just as it did this time last year.
“Fed rate-cut pricing, now at 28-29bps for September, has yet to shift firmly in that direction. We recognise that we are moving early, but we expect preliminary revisions to employment data for April 2024 to March 2025 to support our 50bps call,” Englander explained.
He added, “We maintain our view that headline payrolls and unemployment data underplay the degree of labour-market softening given distortions from the birth-death adjustment and the more clear-cut decline in the employment-population ratio.”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
