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NFP Preview: 85K Jobs Test the AI Jobpocalypse Narrative
The NFP consensus of 85K jobs, 3.4% wages, and 4.3% unemployment sets up a test for the AI displacement narrative. Here is how it transmits through the dollar and yields.
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The monthly nonfarm payrolls report on Friday is expected to show the U.S. economy added 85,000 net new jobs. Average hourly earnings are forecast to rise 0.3% month-over-month (3.4% year-over-year) and the unemployment rate to hold at 4.3%. These numbers land as the narrative around artificial intelligence displacing workers returns to full volume. Traders need to separate headline fear from the actual transmission mechanism through rates and the dollar.
The Policy Path and Dollar Reaction
The naive read is straightforward: an 85,000 print sits below the pre-pandemic trend of roughly 180,000-200,000. The softness will be blamed on AI automation. That framing is tempting. The real story is that the labor market is cooling from an overheated 2023 level, driven by higher interest rates and a normalization in hiring demand. The unemployment rate staying at 4.3% signals no collapse. Average hourly earnings at 3.4% year-over-year show wage growth still sticky above the Fed’s comfort zone.
The better market read focuses on how the Fed interprets this mix. An 85,000 print with steady unemployment and sticky wages keeps the door open for a 25-basis-point cut in September. It does not guarantee an accelerated pace. The two-year yield, which tracks the policy path, could move 5-10 basis points on the day. If the data prints exactly as consensus, expect the dollar to weaken modestly against the euro and yen as the market prices in a slower pace of cuts relative to other central banks. An upside surprise in earnings (0.4% month-over-month or higher) would push yields up and the dollar higher, punishing the dovish trade.