The upcoming August jobs report, set for release on Friday at 8:30 a.m. ET, is likely to reflect another month of subdued hiring, following a contraction of 23,000 jobs in July. Economists surveyed by Dow Jones anticipate an addition of 53,000 roles in August, with the unemployment rate remaining steady at 4.1%. If these projections hold, it would mark the third weakest month for job creation this year.
Wage Growth and Inflation Pressures
Forecasts also point to modest wage growth, with expectations of a 0.3% month-over-month increase and a 3% annual rise. However, some analysts suggest that wage growth could be even softer. Citi’s Veronica Clark noted, “We would not be surprised to see wage growth even softer,” aligning with consensus expectations.
This slowdown in wage growth comes at a challenging time for consumers, particularly those in lower income brackets. July’s inflation rate stood at 3.4% year-over-year, but that was before energy prices began climbing again. On Thursday, Brent crude oil surpassed $97 per barrel before closing near $95, marking a rise of over 20% since August 4. August inflation data will not be available until September 11, but any uptick from July would widen the gap between wage growth and rising prices.
Seasonal Weakness and Additional Factors
August has historically been a weak month for U.S. job growth. According to analysts at Goldman Sachs, the August jobs report has missed expectations in 11 of the last 16 years. JPMorgan economist Abiel Reinhart highlighted in a Thursday note, “Growth on average has been slow in each of the last couple summers. Private jobs have fallen in August in each of the last two years.”
This August could be even more challenging. Reinhart also pointed to the end of Temporary Protected Status for approximately 350,000 Haitians on July 27, which terminated work permits obtained through that status.
Private Sector Indicators Signal Weakness
Several private sector indicators ahead of the report have already set a cautious tone. ADP’s payroll report on Wednesday showed that private employers added only 38,000 positions in August. The report also revealed that companies with over 500 employees contributed the majority of roles, while medium-sized firms added no jobs at all.
Vanguard senior economist Adam Schickling commented, “The labor market’s summer soft patch extended into August.” The firm estimated that only 8,000 jobs were added in August, based on data from the 401(k) plans it manages for millions of companies. Schickling noted, “The slowdown appears to be concentrated in recruiting rather than workforce reductions,” leaving “new labor force entrants and those seeking employment facing the most difficult conditions.”