August Jobs Report Forecasts See a Rebound in Hiring

Forecasts call for the August jobs report to show a bounceback in hiring after a soft reading in July, while the trend for moderating jobs growth is expected to remain intact.

Even if the pace of hiring across the US economy in August did pick up from the previous month, economists say the Federal Reserve will still have enough breathing room to cut rates when officials meet to set policy in mid-September. However, a weak reading could give Fed officials reason to make a more aggressive cut.

Economists predict the economy added 160,000 jobs in August, according to FactSet’s consensus. That would mark an improvement from the 114,000 added in July. Meanwhile, the unemployment rate is forecast to drop to 4.2% from 4.3%. The jump in the rate in July set off fears that the economy could be headed toward a recession, but economists say the August report should help alleviate any remaining concerns about an imminent economic downturn. Instead, the picture should be one of cooling but healthy growth in the labor market.

The August data should show an “overall moderate labor market,” says Gregory Daco, chief economist at EY-Parthenon. “That should reassure those who panicked over a sudden weakening of conditions, and reinforce the story we’ve been highlighting for a year now that employment growth is indeed moderating.” Daco is forecasting an increase in hiring of around 145,000 for August.

August Jobs Report Forecast Highlights

• Job report release date and time: Friday, Sept. 6, at 8:30 a.m. EDT
• Nonfarm payroll employment is forecast to rise 160,000 vs. the 114,000 increase in July, according to FactSet
• The unemployment rate is forecast to drop to 4.2% vs. 4.3% in July
• Hourly earnings are projected to rise 0.3% monthly from 0.2% in July

Rebound Predicted for August

Blerina Uruci, chief US economist at T. Rowe Price, says a monthly run rate of around 150,000-200,000 jobs indicates a market that is neither accelerating nor rolling over into recession. “The number is healthy for the US economy, not as high compared to 2022 and 2023, but there is a general sense that the breakeven rate has increased in the last 12 months.” She added that some factors that “drove the overall downside of hiring in July probably won’t repeat in August.”

Daco says, “Before the pandemic, 180,000 jobs per month were considered trend numbers. Over the last 18 months, we’ve had the labor supply dynamic lift those numbers to 200,000, even 230,000 jobs on a monthly basis, according to the Fed. 150,000 is slightly below the trend, but still generally a healthy print.”

What Could the August Report Mean for the Fed?

The Fed is widely expected to cut the federal-funds rate target by a quarter of a point to the 5.00%-5.25% range at the FOMC meeting in mid-September. Bond traders see a roughly 61% chance of this, according to the CME FedWatch tool, while 39% predict a more radical cut of 50 basis points.

Daco expects most policymakers would be on board with a gradual easing of monetary policy at 25 basis points, even if the August job report showed signs of weakness. “The labor market would have to show a significant weakening for the majority of FOMC members to vote for a 50-basis-point cut,” he says. He believes that for the Fed to take a more radical approach, it would have to see “initial claims starting to trend up more significantly, reports of layoffs being more broad-based and indiscriminate, and weakening in labor markets.”