Looking at Non-Farm Payrolls to gauge Federal Reserve rate cut expectations is often overrated

Before and after each Non-Farm Payrolls release, the hottest topic in the market is almost always “When will the Fed cut rates?” However, a review of history shows that the market tends to price in rate cuts faster than reality. Even if the non-farm data shows a temporary slowdown, it doesn't necessarily lead to an immediate change in the Fed’s policy stance, because the Fed pays more attention to “trends” rather than “single data points.”
The resilience of employment data actually gives the Fed more “waiting” room. As long as the employment market does not experience systemic deterioration, the Fed has no urgent reason to quickly shift to easing. Especially before inflation fully returns to the target range, a “moderate cooling” in employment is actually the most ideal scenario — it neither triggers a recession nor prevents inflation from gradually decreasing.

This is also why markets often experience sharp volatility after non-farm data releases, only to quickly recover. Because a single data point is rarely enough to truly change policy direction unless it consistently points in the same direction for several months. For investors, over-committing to “single non-farm = policy shift” often results in frequent market rejections.

A more rational approach is to combine non-farm data with other forward-looking indicators, such as job vacancies, initial unemployment claims, and corporate hiring intentions, to assess whether employment has already entered a downward trend. Only when these indicators resonate together might the Fed’s stance change substantially. Until then, non-farm data is more like an emotional catalyst rather than a trend driver. #非农就业数据