Friday’s NFP Jobs Report Is the Warm-Up. Next Week’s FOMC Is the Main Event

Friday’s NFP Jobs Report Is the Warm-Up. Next Week’s FOMC Is the Main Event.

Markets have had three trading days to digest Kevin Warsh at Jackson Hole. They did not like the tone. Hike odds jumped. Treasury yields followed. Equities wobbled. Now the calendar tightens. Friday’s nonfarm payrolls (NFP) for August is the last big labour print before the Federal Open Market Committee meets on 15–16 September. That meeting comes with a Summary of Economic Projections and a press conference from a chair who has already told the room that inflation work is not done. Layer on two other facts. Monday is Labour Day in the US, so liquidity thins from Thursday afternoon. And September is the only month in which the S&P 500’s long-run average return is negative. That is the week. Jobs first. Policy second. Seasonality in the background.

The data that actually matters this week:

NFP prints at 08:30 ET on Friday 4 September. It is August’s report. Consensus from the Wall Street Journal survey is modest, not heroic:

• Nonfarm payrolls: about +53,000 after July’s –23,000
• Unemployment rate: 4.1%, unchanged
• Average hourly earnings: +0.3% month-on-month, about 3.0% year-on-year

The range around that headline is wide. Some desks are nearer 65–80k and treat July as noise. Others worry the rebound is just education and seasonal bounce. ADP on Wednesday (consensus +47k) and weekly claims on Thursday (205k) will set the mood before Friday.

Why this print carries extra weight:

• It is the last full employment report Warsh’s committee sees before 16 September.
• July already looked soft. A second weak number would argue the labour market is cooling faster than inflation.
• A hot number — especially with wages above 0.3% — would validate the Jackson Hole message and make a hike the base case, not a debate.
• Revisions matter as much as the headline. July was negative. If June and July are revised down again, the “rebound” story dies on arrival.

Watch three lines, not one: payrolls, the jobless rate, and wages. A 50k print with wages at 0.4% is not dovish. A 20k print with unemployment at 4.3% is not hawkish, whatever Warsh said in Wyoming.

How Warsh differs from what markets were used to

Jerome Powell’s last years were a long negotiation with inflation and a labour market that cooled in slow motion. Forward guidance was dense. The dots were theatre. Markets learned to fade the press conference and wait for the next CPI. Warsh is running a different play.

• Less “we will be data-dependent in both directions.” More “inflation has not meaningfully improved; we have work to do.”
• Less comfort with a quiet Fed that lets futures price the path. More willingness to let the market feel uncertainty.
• A July FOMC that held at 3.50–3.75% with three presidents already wanting a hike — then a Jackson Hole speech that sounded tighter than that hold.

That gap is why the tape felt spooked. The July statement said pause. The Friday speech said the job is unfinished. Bond desks do not like chairs who sound like two different committees a month apart. The practical difference for this week: Powell-era traders bought dips on soft payrolls. Warsh-era traders have to ask whether soft payrolls even stop a hike if core inflation is still miles from 2%. The chair has already said AI-led productivity may let the economy run hotter without blessing easier policy. That is not the 2024 playbook.

What FedWatch is saying right now

CME FedWatch turns fed-funds futures into a probability of the next move. It is not a poll of the Board. It is the price of insurance. As of Tuesday 1 September:

• A 25-basis-point hike on 16 September is the modal outcome, at around 66–68%.
• A week before Jackson Hole, those odds were under 40%.
• After the speech, they were mid-50s. They have kept grinding higher into this week.

Cuts are not on the September board. The debate is hike versus hold. By year-end, the futures strip still has a meaningful chance of a second move.

How to read that into Friday:

• A strong NFP and firm wages → hike odds toward 80% and the 2-year yield does the talking.
• A middling 50k with unchanged unemployment → odds stay in the 60s. The market waits for 11 September CPI.
• A second negative payrolls print or a jump in unemployment → odds can fall back toward a coin flip. That is the only path that takes September off “most likely hike.”

FedWatch will reprice in minutes on Friday. That repricing is the signal for the next ten sessions, not the headline itself.

September’s unlovely habit

The “September effect” is not folklore. It is a stubborn average.

• Since the late 1920s, the S&P 500’s average September return is about –1.2%. It is the only month with a negative long-run mean.
• Since 1950, the average is about –0.7%, with positive Septembers less than half the time. When the month falls, the average drop is close to –4%.
• Over the last decade, the pattern is the same story with different actors: mutual-fund window dressing into quarter-end, summer books being cleaned, and a mid-month FOMC that often arrives when positioning is already long.

Two caveats, because averages hide the year you are in. First, 2026 is a midterm year. Some of the best Septembers on record were midterms — 2010, 1998, 1954. The sample is small. Do not treat it as a buy signal. Treat it as a reminder that “worst month” is not “always down.”

Second, trend still matters. When the S&P sits above its 200-day average into September, history is less brutal than when it enters the month already broken. Seasonality is climate. The Warsh repricing is weather. For a portfolio, the honest use of the September cycle is this: expect chop, do not expect a script. Month-end selling in weak years is often worse than in the first week. NFP and FOMC sit in the first half. That is where the volatility budget gets spent.

Labour Day and a thin tape:

US markets close Monday, 7 September. Europe and Asia do not. That mismatch always leaks into Thursday and Friday.Typical pattern into this holiday:

• Risk books get lighter from Thursday lunchtime New York time.
• Spreads widen. Index futures overshoot headlines.
• NFP Friday before Labour Day is a classic trap: the first reaction is large, the follow-through on Tuesday is the real one.

If Friday’s print is a shock, do not assume the 10:00 ET futures move is the last word. The cash session after Labour Day, with FOMC eight sessions away, is when real money has to decide whether Warsh is bluffing.

How the week can break

1. Hot NFP (well above 80k, wages firm)
   Hike odds lurch toward fully priced. Two-year yields lead. Growth stocks give back duration. The dollar firms. That sets a hawkish glide path into 16 September unless CPI on the 11th collapses.
2. Consensus NFP (40–70k, unemployment 4.1%)
   The market stays in the Jackson Hole range. FedWatch holds in the 60s. Bonds do the work, not equities. Attention shifts to CPI.
3. Soft NFP (near zero or negative, unemployment up)
   Hike odds drop. The 2-year rallies. Equities bounce first, then ask whether Warsh still hikes on inflation alone. That is the scenario that turns next week into a genuine two-way FOMC, not a coronation.

In all three cases, the bond market remains the tell. HYG/IEF still saying credit is calm does not stop IEF from being sold if the 7–10 year has to reprice a 3.75–4.00% funds rate.

What to do with it:

This is not a week for heroics into a holiday.

• Size Friday risk as if the first print will be revised on Tuesday.
• Let the 2-year and FedWatch, not the headline payrolls number, decide whether the hike is “in.”
• Respect September’s average without selling the year because the calendar flipped.
• Remember the sequence: NFP 4 September → Labour Day 7 September → CPI 11 September → FOMC 16 September.

Warsh has already told you inflation is unfinished business. Friday tells you whether the labour market gives him cover to act — or forces him to explain a hike into a stalling jobs tape. That is the guide to next week. The dots and the press conference will do the rest.

By Anna Coulling – creator of volume price analysis

By Anna Coulling – creator of volume price analysis