August Jobs Report Preview: Key Insights From Experts
“Labor markets are quite stable,” said Federal Reserve Chair Kevin Warsh last Friday in his keynote address at the Jackson Hole Economic Symposium. He pointed to the unemployment rate, which, at 4.1%, “remains low by historical standards.”
And while recent monthly jobs reports have been weaker than expected, the Fed chair explained that employment gains are “naturally going to run low” in a labor market that is “consistent with full employment.”
Those recent reports showed the U.S. lost 23,000 jobs in July, falling well short of estimates for the addition of 85,000 positions. Additionally, job growth for May and June was downwardly revised, resulting in 103,000 fewer jobs than previously reported.
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So what does this mean for August? We’ll find out on Friday morning when the monthly data is released. But David Payne, staff economist at The Kiplinger Letter, writes in the Kiplinger jobs outlook that “the new normal for jobs reports going forward is likely to be gains of fewer than 100,000, rather than additions in six digits.”
ADP jobs report came in lower than expected
Wall Street got a peek at how things are going in the labor market on Wednesday morning with the ADP National Employment Report, which showed private payrolls rose by 38,000 in August, less than the 46,000 added in July and below the 47,000 economists expected.
The industries seeing the largest increases in jobs were education, health care, leisure and hospitality, and construction, while manufacturing saw the biggest decline in positions.
When is the next jobs report?
The Bureau of Labor Statistics will release the next jobs report at 8:30 am Eastern Standard Time on Friday, September 4. Economists expect the U.S. to have added 58,000 new jobs in August and the unemployment rate to remain at 4.1%.
Ahead of the August jobs report, we looked at what economists, strategists and other experts on Wall Street expect the data to show and what the results could mean for the Fed and investors going forward. You’ll find these outlooks, edited at times for brevity, below.
What Wall Street expects from the August jobs report
(Image credit: Getty Images)
“Immigration policy changes likely held back payrolls growth in August. The government cancelled Temporary Protected Status for Haitians in the United States on July 27, which most accounts project affected over 300,000 TPS holders — also ending their work authorization. The soft ADP report highlights downside risk to the government’s August jobs report. Fifth Third Commercial Bank forecasts a below-consensus 25,000 drop in payrolls in that report, which may pick up a larger effect from the TPS cancellation. The unemployment rate is forecast to hold steady at 4.1% as the labor force contracts, continuing its recent trend — the labor force is down by 1.3 million workers in the twelve months through July as more older workers retire and fewer graduates and immigrants take their place.” – Bill Adams, Chief U.S. Economist, Fifth Third Commercial Bank
“We expect nonfarm payroll growth to rebound to 80K in August. July’s drop in employment overstates the degree of labor market cooling, in our view, with outsized declines in leisure & hospitality and state & local government education accounting for much of the downside surprise. We look for partial reversals in both industries this month. More broadly, alternative indicators suggest job growth has stabilized, rather than continuing to deteriorate.” – Wells Fargo economists
“When we triangulate across all the labor market data that will be released this week, we’re expecting that the labor market will be room temperature, rather than boiling or frozen. And that would be good news for the Fed. We are still baselining the Fed to remain on hold this year, but if job creation were to come in significantly hotter than consensus expectations (e.g. more than double), that might cause the Fed to give more consideration to rate hikes if inflation does not cooperate.” – BeiChen Lin, Senior Investment Strategist and Head of Canadian Investment Strategy at Russell Investments
“Warsh’s Jackson Hole speech reinforced that the Fed’s focus remains on inflation. Payrolls are unlikely to be the deciding factor for a September hike. We expect August payrolls to rise 40k, below consensus but consistent with another seasonally soft summer report. The unemployment rate should remain 4.1%, though a rebound in participation could push it to 4.2%. A significantly weaker report could lower hike odds, but CPI remains the key release for determining whether the Fed follows through. We hold our call for a September hike.” – BofA Securities economists
“The labor market is pretty benign right now. The jobless rate is historically low and has remained that way for a few years, and unemployment claims are near their lowest level in decades, so there’s a strong argument to be made that the Fed has accomplished its mission on the employment front, and can now continue to pay more attention to inflation. Our message to investors is to focus on commodities, such as oil, gold and silver, as we’re in an environment where interest rates may remain higher for longer. As commodity prices continue to move higher, it’s important to have an allocation to those assets, and many investors do not.” – Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Wealth Management
“U.S. payrolls could shed more light on how supply constraints are shaping the labor market. Slower labor-force growth means softer job gains may not signal materially weaker demand, especially as AI-related investment supports activity. That combination could keep wage and inflation pressures persistent.” – BlackRock Investment Institute
