Friday’s Nonfarm Payroll (NFP) report from the Bureau of Labor Statistics (BLS) once again disappointed markets. The preliminary estimate for August showed just 22,000 jobs added, well below the 75,000 expected. More importantly, June’s payroll figure was revised lower by 27,000 jobs, turning that month into a net loss of 13,000 – the first negative print since December 2020.

Markets initially rallied on the release, betting that weak job creation would push the Federal Reserve to begin cutting rates sooner and more aggressively. However, enthusiasm faded as investors absorbed the broader implications of a labor market that may be cooling faster than expected.

While Friday’s release grabbed headlines, the real story for markets may come this Tuesday with the Current Employment Statistics (CES) Benchmark Revision Announcement. This annual update takes the monthly NFP data, which is based on employer surveys and other inputs, and reconciles it with more complete unemployment data. The process often results in sizable and often negative revisions to prior payroll estimates.

Historically, CES benchmark revisions have occasionally revealed that the labor market was significantly weaker than originally reported. Large negative revisions can shake investor confidence, alter Fed policy decisions, and shift sentiment in different asset classes. In past cycles, such revisions have even triggered debates about whether payroll data overstated job creation during key turning points in the economy.

This week’s benchmark revision comes at a delicate time. With rate cuts already priced in and market participants debating the pace of monetary easing, a sharp downward adjustment could reinforce economic slowdown fears.

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