Global investment bank (IB) JPMorgan projected that there is a high probability the Standard and Poor's (S&P) 500 index will rise following the release of the United States' August employment report in the institutional sector.
According to Shinyoung Securities on the 3rd, JPMorgan revealed this through its analysis of the 'Nonfarm Payroll (NFP) scenario'. The U.S. Department of Labor is scheduled to announce the August employment report in the institutional sector on the 5th (local time).
JPMorgan expected the number of new jobs in the institutional sector to be 75,000, aligning with market expectations. The unemployment rate is also anticipated to be 4.3%, consistent with market forecasts.
JPMorgan estimated a 40% probability that the new jobs in the institutional sector for August will be in the range of 65,000 to 85,000. In this scenario, the S&P 500 index is projected to rise by 0.5% to 1%.
In addition, it suggested the following projections for the S&P 500 index based on the number of new jobs in the institutional sector: ▲25% probability of 85,000 to 110,000 jobs resulting in a rise of 0.5% to 1.25%; ▲25% probability of 40,000 to 65,000 jobs resulting in a rise of 0.25% to 0.5%; ▲5% probability of more than 110,000 jobs resulting in a rise of 1% to 1.5%. It assessed the probability that the number of jobs would fall below 40,000 at 5%, and in this case, it expected the S&P 500 index to fall by 0.25% to 0.75%.
JPMorgan noted, "Overall, the scenario leans toward the upside," adding that there is a perception that this employment report in the institutional sector will not have a direct impact on the Federal Open Market Committee (FOMC) decision in September.
JPMorgan indicated that while the likelihood is small, if employment significantly slows contrary to market expectations, calls for a 'big cut' (a 0.5 percentage point rate reduction) could resurface, and the possibility of a recession might also increase.
Conversely, JPMorgan explained that stronger-than-expected employment indicators could also be a risk factor. Currently, the market is almost certain of a rate cut at the September FOMC, but if the labor market is too robust, the Federal Reserve (Fed) may hold off on reducing rates. JPMorgan estimated that to the extent that the Fed would postpone the rate cut, there would need to be a 'surprise result' in the new jobs in the institutional sector in August, ranging from 175,000 to 200,000.
JPMorgan added, "The market's focus is on the consumer price index (CPI) to be announced on the 11th," stating that as the Fed has recently shifted its focus more toward the labor market, if a strong nonfarm payroll report in the institutional sector coincides with a high CPI, the likelihood of the Fed delaying a rate cut could increase.