Industrial: The September baseline scenario is still the Fed cutting interest rates by 25bps.

Industrial released a research report stating that after the release of the US August non-farm data, the market is fiercely debating whether there will be a 25bps or 50bps rate cut in September. In addition to dovish comments from several Fed officials after the data release, US bond yields have been volatile. The market's expectation of a 25bps rate cut in September implied by federal funds futures has increased. Looking ahead, the cooling trend in the economy will lead to a rate cut, but the resilience of wages still points to a 25bps rate cut by the Fed. Before the September meeting, continue to focus on the potential impact of CPI data on the rate cut path; the US stock market still has downside risks. Event: In August 2024, the US added 142,000 non-farm jobs, below the expected 165,000 and revised down from the previous 89,000; the labor participation rate remained unchanged at 62.7%, and the unemployment rate fell as expected by 0.1 percentage points to 4.2%. Hourly wage growth unexpectedly increased by 0.2 percentage points year-on-year to 3.8% and by 0.2 percentage points month-on-month to 0.4%. Continued confirmation of cooling trend in employment Overall, under the business survey method, the number of newly employed people in August increased to 142,000, but the previous value was significantly revised down by 25,000 to 89,000, showing relatively weak employment growth. Under the household survey method used to calculate the unemployment rate, the increase in non-farm employment in August was minimal, and the growth in employment came mainly from the agricultural sector (historically, new employment has been contributed almost entirely by non-agricultural sectors); the proportion of part-time employment for economic reasons continued to rise, while full-time employment declined. In terms of structure, the education and health industries, which have shown high resilience in this round, saw a further decline in new employment in August, indicating a continued cooling on the demand side; manufacturing industry sentiment remained subdued, with a significant drop in employment in durable goods manufacturing; the standout growth in August was in the leisure and hospitality industry, possibly related to the seasonal rebound in travel and entertainment consumption; the construction industry also recorded a significant increase in employment. Concerns about a rapid deterioration in the job market have eased. The August unemployment rate fell as expected, providing some "breathing room" for the cooling labor market. With little change in the labor force on the denominator side, a decrease in the number of unemployed on the numerator side led to a decrease in the unemployment rate; average working hours also rose slightly. Breaking down the number of unemployed, the overall number of layoffs is on the rise while the trend of voluntary resignations is declining (indicating an economic slowdown), but the number of layoffs in August decreased, putting a temporary halt to concerns about a rapid deterioration in the job market. Wage inflation stickiness remains Wage growth accelerated and exceeded expectations. Hourly wage growth rose by 0.2 percentage points year-on-year to 3.8% and by 0.2 percentage points month-on-month to 0.4%, with wage growth rates in industries such as information, professional services, retail, and transportation and warehousing all expanding. Recent CPI and PCE inflation data also show slight improvement in core service inflation, indicating that the pace of inflation decline may be slower than previously thought. Supply-demand imbalances persist. Labor market tightness is due to supply exceeding demand, with the improvement in the labor participation rate in June and July not continuing in August, and the possible decrease in illegal immigration reducing the supply of labor, posing an obstacle to a smooth decline in wage inflation. Risk warning: Unexpectedly sharp cooling in the US job market, unexpected adjustments in Fed monetary policy, and downside risks to the US economy.