Market Anticipation Ahead of U.S. Economic Data Release

Market Anticipation Ahead of U.S. Economic Data

Wednesday is poised to be a pivotal day for financial markets, particularly in the realm of cryptocurrencies, as traders await the release of lesser-known U.S. economic data that may paint a bleak picture of the economy. Despite this, bitcoin (BTC) investors should approach with caution, as the data could potentially misrepresent the actual economic conditions, according to insights from a prominent investment bank.

The U.S. Bureau of Labor Statistics (BLS) is set to unveil a preliminary estimate for the benchmark revision of monthly nonfarm payrolls, covering the period from April 2023 to March 2024. Historically, this report is released during the summer or fall of each year, and observers are predicting that the forthcoming update will indicate a slower rate of job growth than previously reported.

As highlighted by SignalPlus, a technology firm dedicated to democratizing crypto options, “On Wednesday, the Federal Reserve will receive revised job growth figures, which may reveal that job growth from last year through early this year was weaker than previously estimated.”

Morgan Stanley anticipates a significant downward revision, estimating that payrolls could be adjusted downward by 600,000, which translates to an average reduction of approximately 50,000 jobs per month over the past twelve months. Such a substantial revision could reignite recession fears, leading to a migration away from riskier assets, including cryptocurrencies, similar to the market behavior observed following the July jobs report released earlier this month.

However, Goldman Sachs cautions that the anticipated downward revision may not fully reflect the underlying economic reality. The firm suggests, “Nonfarm payroll growth averaged 250,000 per month over the period from April 2023 to March 2024. While next week’s revision could lower that pace to between 165,000 to 200,000 per month, we believe that part of this adjustment may be erroneous. The ‘true’ rate of employment growth during this time frame was likely closer to 200,000 to 240,000 per month,” according to their Economics Research team in a note to clients dated August 16.

The team elaborated that this data is derived from the quarterly consensus of employment and wages (QECW), which relies on unemployment insurance records. Notably, these records do not account for illegal immigrants, who have significantly contributed to job growth in recent years.

Following the BLS report, market attention will shift to the minutes from the Federal Reserve’s meeting in July, scheduled for release at 18:00 UTC. Morgan Stanley expressed its interest in these minutes, stating, “We will look for insights into why the FOMC opted to hold off on considering monetary policy easing until September and whether a 50 basis point rate cut was part of the discussion.”