August jobs report likely to point to slowing labor market
What to expect from the August jobs report — and why it matters
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All eyes will be on the August jobs report when it is released Friday morning as investors look for clues about the labor market's health in the face of higher interest rates and sticky inflation.
The U.S. Department of Labor's high-stakes August payroll report, due at 8:30 a.m. ET, is projected to show that hiring increased by 170,000 last month and that the unemployment rate held steady at 3.5%, according to a median estimate by Refinitiv economists.
That would mark a drop from the 187,000 gain in July and the 312,000 monthly average recorded over the previous 12 months. However, it is slightly above the average pre-pandemic monthly increase.
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Construction workers are seen on a job site in Miami on May 5, 2023. (Joe Raedle/Getty Images / Getty Images)
"The August jobs report will likely bring more evidence that the labor market is gradually cooling," said EY chief economist Gregory Daco.
Daco said he anticipates some "noisy data" on Friday, thanks to the ongoing actors and writers strike that has shut down most Hollywood film and television productions, as well as the bankruptcy of trucking giant Yellow.
"We estimate that these two factors could potentially pose a cumulative drag on payrolls worth around 30,000 to 40,000 jobs in August," he said.
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The Federal Reserve is closely watching the report for evidence that the labor market is finally softening after months of surprisingly solid job gains as policymakers try to wrestle inflation under control. Although the consumer price index has cooled from a peak of 9.1% in June 2022, it remains well above the Fed's preferred 2% target despite 11 straight interest rate hikes.
Slower job growth and further moderation in wage gains on Friday could be a welcome sign for the U.S. central bank.
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The labor market has remained historically tight over the past year, defying economists' expectations for a slowdown. However, there are signs that it is beginning to soften.
A separate report released Wednesday showed that job openings dipped to 8.8 million at the end of July. It marked the lowest level for job openings since March 2021.
Still, job openings remain historically high. Before the COVID-19 pandemic began in early 2020, the highest on record was 7.6 million. There are roughly 1.5 jobs per unemployed American.
Jobseekers visit booths during the Spring Job Fair at the Las Vegas Convention Center in Las Vegas on April 15, 2022. (K.M. Cannon/Las Vegas Review-Journal / Getty Images)
The report also pointed to a decline in resignations, indicating that employees are growing less confident they can quit their jobs and find new ones.
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The data, combined with another report that showed hiring by private companies rose at the slowest pace in five months, painted a picture of a labor market that is finally beginning to cool ahead of the August payroll report's release.
"The labor market is cooling and is taking pressure off policymakers concerned with a second wave of inflation," said Jeffrey Roach, chief economist at LPL Financial. "Businesses should get some respite as inflation decelerates and the risk of quiet quitting dissipates."