A quick note on why today’s Jobs Report matters.
The monthly Non-Farm Payrolls number is always an exciting number, in part because jobs are the economic datapoint that people care about the most. The unemployment rate (and the pace of job creation more broadly) is also extremely important to the Fed which has a mandate of promoting stable employment through monetary policy.
This brings us to one of the most important stories in the market right now, which is that traders are testing the Fed.
Matthew Boesler has written a ton about this, but the basic gist is that traders are increasingly placing bets that the Fed will do its first rate hike prior to when the Fed currently indicates that it will. In other words, the Fed has indicated through language that it will keep rates essentially at zero for a long time. But traders are thinking that with the economy finally breaking out, the Fed will be forced to raise rates sooner.
If today’s jobs report is a monster — and it could be — then that story line will some sharper into view, as traders keep pushing that bet that the Fed will relent sooner than it currently anticipates.