Economists Expect Another Tepid US Jobs Report, Supporting Rate Cut
August hiring may have been concentrated in just a handful of industries as a result.
Economists expect Friday’s employment report to extend the weakest stretch of US job growth since the pandemic, likely locking in a Federal Reserve interest-rate cut.
Nonfarm payrolls probably grew 75,000 in August, according to the median estimate in a Bloomberg survey of economists, which would mark a fourth straight month of job growth below 100,000. The unemployment rate is seen rising to 4.3% — the highest level since 2021.
Hiring has materially cooled in recent months as companies navigate concerns about demand, higher costs and lingering economic uncertainty from President Donald Trump’s erratic trade policy. That’s put increased pressure on Fed officials to step in and support the slowing labor market.
“It’s a labor market that is basically frozen,” said Stephen Stanley, chief US economist at Santander US Capital Markets LLC. “Firms are taking a pause, and we’ll see what things look like when we get to the other side.”
August hiring may have been concentrated in just a handful of industries as a result.
EY-Parthenon Chief Economist Gregory Daco expects private sector job growth to be fueled primarily by health care and leisure and hospitality. Anna Wong of Bloomberg Economics says the headline figure will also get a boost from local government hiring, after temporarily frozen federal education funds were released.
The July jobs report — published Aug. 1 — showed much weaker job growth in recent months than previously reported, altering many economists’ and policymakers’ perceptions of the labor market. The massive downward revisions also prompted Trump to abruptly fire the head of the Bureau of Labor Statistics, a move that raised concerns about the integrity of US data going forward.
Given the number of revisions seen in 2025 thus far, there’s a risk that July job growth will also be marked down, said Shruti Mishra, an economist at Bank of America Corp. “This could point to more sustained labor market weakness than we have been forecasting,” Mishra said in a note.
The BLS on Tuesday will also release its preliminary benchmark revision, an adjustment that could shave hundreds of thousands from reported payrolls in the year through March.
Fed Impact
“With labor market conditions becoming increasingly fragile and Fed Chair Powell signaling openness to a rate cut,” a weak August jobs report would further strengthen the case for a reduction, Daco said in a note.
Other indicators and surveys are also pointing to a weakening labor market. Data out Wednesday showed US job openings fell in July to the lowest in 10 months — data that makes it even more challenging for the jobs report to derail a September rate cut, according to analysts at Evercore ISI.
A particularly weak report could even drive bets for a bigger rate reduction this month. Zachary Griffiths, head of investment-grade credit and macro strategy at CreditSights, said a payroll gain that keeps the three-month average for monthly job gains below 50,000 might be enough to spur such a move.
Fed officials are largely expected to lower their benchmark rate by a quarter point at their Sept. 16-17 gathering, according to pricing in futures contracts. But it’s far from clear what the Fed will do at following gatherings.
With inflation firm and the labor market weakening, policymakers are in a difficult spot with their mandates for full employment and stable prices pulling them in opposite directions, said Sarah House, a senior economist at Wells Fargo & Co. There could also be more disagreement and more dissents among members of the Federal Open Market Committee about the right path forward, House said.
Still, she expects the labor market to be the main decider for rate decisions in the coming months.
“At least here in the near term, the path of monetary policy is going to depend more on what happens with the jobs market,” House said. “The labor market can turn more quickly.”
