UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Payrolls without precision'
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Sep 5, 2025 The upcoming US employment report raises alarms about the quality of labor market data. Deteriorating response rates and funding issues complicate the picture. Interestingly, despite these challenges, middle-income consumers remain resilient. Additionally, there’s an unexpected surge in UK retail sales. Meanwhile, financial markets are more focused on a narrative of economic weakness, which could influence Federal Reserve decisions.
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Deteriorating US Data Quality
- US employment data quality has deteriorated due to falling survey responses and underinvestment in data collection.
- The resulting statistics are imprecise but not expected to be systematically biased.
Weakening Labour Market, Not Collapse
- Multiple imprecise indicators point to a weakening US labour market this year without triggering a consumer spending collapse.
- The slowdown looks likely to prompt Federal Reserve easing rather than economic collapse.
Powell's Data Dependency Matters
- Fed Chair Powell's data-dependent stance means a single surprising employment print could change rate-cut expectations.
- Markets nevertheless lean toward expecting growth worries to outweigh inflation risks.