Federal Reserve officials are about to enter the quiet period before the September meeting.

Whether to cut interest rates by 50 basis points or 25 basis points will largely be determined by this month's non-farm payroll data.

At 20:30 Beijing time on Friday, the United States will release the August non-farm employment report.

With less than two weeks to go before the much-anticipated first rate cut by the Fed, Wall Street and traders are closely watching whether the labor market performance supports a substantial rate cut by the Fed.

Previously, the U.S. unemployment rate unexpectedly rose to 4.3% in July, triggering the recessionary signal of the Sum Rule, and the increase in non-farm employment was also lower than expected, leading to a global stock market crash on "Black Monday" on August 5th, when the market at one point believed that the Fed needed to urgently cut rates to save the market.

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In addition, after Fed Chairman Powell claimed that it was time to start cutting rates, the market has been hotly debating whether the cut in September will be 25 or 50 basis points.

Therefore, this non-farm employment report is particularly under market scrutiny, and regardless of whether the data is lower or higher than expected, asset prices are likely to experience significant fluctuations.

eToro's U.S. investment analyst Bret Kenwell said, "The last employment report was quite disappointing.

It does show some concerns in the labor market, which is the lifeblood of the U.S. economy...

So I think investors may be more nervous before this data is released than before."

From the market expectations, the U.S. is expected to record an increase of 160,000 non-farm population in August, a significant rebound from the previous value of 114,000 people, possibly related to no longer being affected by hurricanes in August and a surge in the number of immigrants; the unemployment rate is expected to slightly fall from 4.3% to 4.2%, partly due to the reversal of temporary layoffs in July; in terms of wages, the monthly and annual rates of average hourly wages are expected to record 0.3% and 3.7%, respectively, both slightly higher than the previous values, possibly related to the base effect.

Julia Pollak, Chief Economist at ZipRecruiter, said, "Our data shows that July was very weak, but August has improved."

She added that the expected increase in non-farm population is around 150,000.

Data from Paychex, a provider of human resources services for businesses, also shows a decline in wage growth.

The company found that "the average hourly wage growth rate (2.89%) fell below 3% for the first time since January 2021," and the growth rate in August further dropped to 1.91%.

Similarly, Homebase, a human resources technology company for small businesses, said that a survey of 100,000 companies showed that working hours in August decreased by 3.5% compared to July, and the number of employees also decreased by a similar percentage.

Powell said in his speech at the annual economic symposium held in Jackson Hole, Wyoming, that hiring has "cooled significantly," and the Fed does not "seek or welcome further cooling in the job market."

Economists interpret this as the Fed potentially accelerating rate cuts if they believe they need to offset the impact of slowing employment.

In the latest published Beige Book, the Fed described the employment level as "generally stable or slightly rising in recent weeks."

This may suggest that the Fed believes the labor market may not continue to deteriorate, even though people are increasingly worried that high interest rates may suppress labor demand too much.

According to the Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Bureau of Labor Statistics on Wednesday, the number of job vacancies in the United States decreased to 7.67 million in July, the lowest level since early 2021, with an increase in layoffs, consistent with other signs of slowing worker demand.

After the data release, short-term interest rate futures showed that the possibility of the Fed cutting rates by 50 basis points in September was once higher than cutting by 25 basis points.

Citibank pointed out that the employment data for August will be the key factor in determining whether Fed officials choose to cut rates by 50 basis points or 25 basis points when they start the rate cut cycle in September.

Since the August employment data will be released the day before the Fed's September meeting quiet period, whether to cut by 50 or 25 basis points will largely be determined by this data.

The bank expects the August report to be roughly similar to July, with an increase of 125,000 jobs and the unemployment rate remaining at 4.3%, all expectations are more pessimistic than the market consensus.

Citi believes that this will indicate that the weaker data in July was not caused by temporary factors, but reflects a real weakness in labor demand, and it is expected to prompt the Fed to cut rates by 50 basis points in September.

The bank also pointed out that even if the unemployment rate falls slightly, after several months of rising, a single month's data may not be enough to convince Fed officials that the unemployment rate will not continue to rise.

However, if the unemployment rate falls to 4.2% or even 4.1%, the data on non-farm employment will be more important.

Citi believes that if the increase in non-farm population in August is less than 125,000, even if the unemployment rate falls, a more substantial rate cut may still be a more viable option.

However, Lydia Boussour, Senior Economist at EY-Parthenon, said, "The August employment report should keep the Fed on track to cut rates by 25 basis points at the September policy meeting."

She added, "Employment growth for the year is likely to remain below trend, with employers expected to add an average of 100,000 jobs per month for the rest of the year, and the unemployment rate is expected to rise moderately to 4.5% by the end of the year."

Although a slowdown in employment growth is expected, people are increasingly worried that the labor market is not only slowing down under the pressure of the Fed's interest rate hikes to curb inflation, but is actually gradually heading towards collapse.

Stephen Dover, Director and Chief Market Strategist at the Franklin Templeton Institute, believes that investors may pay more attention to whether the rise in the unemployment rate is due to actual increases in unemployment or due to an increase in labor force participation, the weekly initial jobless claims (an increase indicates more workers being laid off), whether temporary layoffs have become permanent, and the overall increase or decrease in monthly non-farm employment will become key data for judging the true performance of employment.