On Thursday, the S&P 500 and the Nasdaq Composite set fresh highs as weekly unemployment claims in the United States fell to their lowest level since the onset of the pandemic.
For the week ending August 28, first-time unemployment insurance claims totaled 340,000, compared to a Dow Jones forecast of 345,000. This is the lowest figure since March 2020.
The data comes just one day before the release of the crucial August employment report, which investors are carefully monitoring to see how quickly the Federal Reserve will begin tightening its loose monetary policy. Economists estimate that 720,000 new jobs were created in August, down from 943,000 in July.
Fed Chairman Jerome Powell has stressed the importance of additional positive job data before the Fed begins to unwind its huge bond-buying program, shining a spotlight on Friday’s jobs report.
Officials at the Federal Reserve have already stated that they want to “taper” their bond purchases before the end of the year. A significant rise in hiring in August might prompt the Fed to reveal its tapering intentions as early as this month. Meanwhile, a lower rise in line with economists’ expectations could likely put the Fed on pace for a taper announcement later this year.
But what if hiring is underwhelming, with only 500,000 new jobs created or less? Is it possible that the Fed would postpone the tapering until next year?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.