August non-farm payrolls: consensus and recent data line up

Below are the consensus forecasts for the August non-farm payrolls report.

• The consensus estimate is for an increase of 56,000 jobs, with estimates ranging from -25,000 to +121,000.
• July's report showed a decline of 23,000 jobs.
• June saw a gain of 63,000 jobs.
• The private sector consensus is +45,000.
• The unemployment rate is expected to remain at 4.1%, unchanged from prior.
• The participation rate consensus is 61.4%, matching the prior reading.
• The prior U6 underemployment rate was 7.9%.
• Average hourly earnings are expected to rise 3.0% year-over-year, down from 3.2% previously.
• Month-over-month, average hourly earnings are expected to increase 0.3%, compared to a prior 0.1% rise.
• Average weekly hours are projected at 34.3, unchanged from prior.

Data released so far for August provides clues on the labor market.

• The ADP employment report showed an increase of 38,000 jobs, the lowest since January, compared to expectations of 47,000 and a prior 46,000.
• The ISM services employment index came in at 47.8, up from 47.4 previously.
• The ISM manufacturing employment index stood at 51.2, below the expected 52.5 and the prior 52.8.
• Challenger reported 52,881 job cuts, up from 33,429 in the previous period.
• The Philadelphia Fed employment index rose to +27.9 from +10.0 prior.
• The Empire State employment index fell to +9.3 from +11.4 prior.
• Initial jobless claims for the survey week were 206,000, up from 187,000 previously.
• Revelio Labs data showed an increase of 36,500 jobs, down from 79,200 prior.

According to BMO, the headline jobs figure tends to be weak in August on a seasonal basis. The reading has fallen short of estimates 71% of the time and exceeded them 29% of the time, with average misses of 71,000 above and 18,000 below, respectively. For the unemployment rate, 36% of August readings came in above expectations, 28% below, and 36% matched.

Seasonal adjustments in August are complicated by school start dates, leading market participants to typically exclude educational jobs from their analysis.

The jobs trend has softened recently, and last week's initial benchmark revisions unexpectedly reduced job counts through March.

The unemployment rate remains at a low 4.1%, which many interpret as the much-discussed 'low hire, low fire' economy.

The data hints at a soft report, which would add to pressure on the US dollar, already weak after unexpectedly dovish remarks from Fed Governor Chris Waller on Thursday. USD/JPY dropped 330 pips on the day, also hit by unconfirmed intervention, creating a volatile environment for FX traders around the release.

Equities responded more directly to Waller's comments and are also supported by new AI model releases that represent another advance. A weaker jobs report would boost stocks further, but a strong reading could reverse gains.

The front end of the bond curve, with US 2-year yields at 4.33%, is a key area for signals. Currently, the market assigns slightly less than a 50% probability to a September rate hike.