Goldman Sachs: NFP Preview   

From GS Research: We estimate that nonfarm payrolls increased by 60k in August, falling short of the consensus expectation of 75k.  

- We anticipate the unemployment rate rose slightly to 4.3% (rounded from 4.248% in July), reflecting a gradual easing in other labor market slack indicators. However, this could also include a partial reversal of the surge in new entrant employment that temporarily elevated the unemployment rate in July.  

- Average hourly earnings are estimated to have grown by 0.3% month-over-month (seasonally adjusted), supported by modestly favorable calendar effects

Thoughts from Around GS:

Vickie Chang (Global Macro Research):  

The market faces risks from significant surprises in either direction, making an inline or slightly softer print the most favorable outcome for risk assets. Current market estimates suggest growth is priced at approximately 1.8%, aligning with our 2026 Q4/Q4 forecast but slightly above our near-term projections. Our expectation of +60k job growth and a slight uptick in unemployment to 4.3% would likely fall within a benign range, supporting current growth pricing and reinforcing market expectations for a September rate cut.  

However, a weaker-than-expected print, such as an unemployment rate of ≥4.4%, could raise recession fears, prompting markets to pull forward cuts and pressuring equities. Conversely, a stronger print or signs of sustained growth could challenge the market's dovish Fed pricing, driving rates higher and weighing on risk assets. With rising equity volatility and skew, short-dated put spreads offer simple downside protection. For rate strategies, US front-end receivers (1m2y) appeal for downside risk, while terminal rate pricing could be vulnerable to stronger data.  

Ryan Hammond (US Portfolio Strategy):  

Equity markets appear to be looking past near-term economic weakness, focusing instead on resilient 2026 growth and earnings prospects alongside Fed easing. Market pricing suggests ~2% real US GDP growth, consistent with our 2026 forecast. A jobs report in line with or slightly above consensus could validate this view and lift equity prices modestly, though the upside for the S&P 500 is limited given the optimistic starting point and interplay with Fed policy.  

The narrow breadth of this year’s equity rally leaves room for low-quality laggards to catch up if macro data is favorable. However, a much weaker-than-expected jobs report could test investors’ ability to look past short-term challenges, likely driving equity prices lower.  

Shawn Tuteja (ETF/Basket Vol Trading):  

The setup for this NFP release is murkier than in recent months. With rate cuts imminent, weak data may not trigger a “policy mistake” trade, which could keep equities stable in most scenarios. However, recent sector rotation and client degrossing suggest a more defensive market stance. Key moving averages across major indices and full systematic positioning add further complexity.  

The consensus range for Friday’s NFP is 50-75k, a range that equities are likely to react favorably to. Extreme outcomes at either tail of the distribution are more concerning, especially given elevated valuations. A very weak print (<15k with no upward revisions) could shift the September meeting’s rate cut odds from ~23 bps to a coin flip between 25 or 50 bps. If the NFP comes in negative with downward revisions, cyclicals vs. defensives (ex-commodities) could be a strong short trade, as this spread is at all-time highs.  

On the other hand, a very strong print would likely keep the Fed on track for two rate cuts this year. While backend bonds may react negatively, equities could initially respond positively, particularly small caps (RTY), as the steepening curve becomes a medium-term tailwind. However, equities may face challenges from a 10-year yield approaching 5%, a level historically unfavorable for stocks.  

Joe Clyne (Index Vol Trading):  

The SPX is trading less than 1% below all-time highs despite recent market gyrations. While the last NFP report shocked the market with weak numbers and revisions, leading to a 1.6% selloff, tomorrow’s straddle is priced at just ~65 bps. A stronger jobs report is expected to elicit a positive market reaction, as growth concerns outweigh uncertainty over year-end rate cuts.  

With skew near highs and volatility off lows, October SPX put spreads are an optimal hedge for a soft jobs number. For example, the October 5700/6300 put spread (ref 6463f) looks attractive at $50 with a 12:1 payout, buying vol in the 15s and selling in the mid-20s. On the upside, options are less compelling as volatility is expected to retrace lower during a rally, but the October 6600/6750 call 1x2 at $24 is a good trade for a gradual equity grind higher, offering long delta and short vol at inception.  

NDX vol spreads are elevated relative to SPX, so we recommend concentrating long optionality in SPX. Meanwhile, the Russell 2000 (RUT) has been highly responsive to data surprises, making IWM topside exposure appealing despite stretched vol spreads to SPX.