August Jobs Preview: Good News Is Bad News

Consensus expects the US economy to have added 55K nonfarm payrolls in August, rebounding from July’s 23K decline, with the unemployment rate seen holding steady at 4.1%. Average hourly earnings are forecast to pick up, rising by 0.3% M/M, while the average workweek is expected to remain unchanged at 34.3 hours. According to newsquawk, labor market proxies have been mixed in August: claims data softened slightly during the survey window, ADP’s private payrolls data undershot expectations, and Revelio also pointed to cooling hiring in the month, while Challenger reported a rise in August job-cut announcements, despite stronger hiring plans. Business surveys were similarly mixed, with the ISM manufacturing employment index remaining in expansion but slowing, while ISM services employment stayed in contraction; in contrast, S&P Global’s surveys showed hiring strengthening across both manufacturing and services. Consumer confidence data showed an improvement in the labor market differential, although expectations for jobs six months ahead deteriorated. Analysts note that the August data may also be impacted by the expiry of Temporary Protected Status for some workers, which could mechanically weigh on payrolls. Indeed, according to Bloomberg's chief economist, there is a "decent chance" the August jobs print is negative for the second month in a row. In terms of Fed policy, analysts say that a payrolls print close to expectations alongside a steady unemployment rate would be consistent with a stable labor market that is cooling but not deteriorating sharply, and that should keep policymakers focused on the inflation side of the mandate (a negative print is a different story and will immediately chill any expectations of a rate hike). 

Expectations: