US Payrolls To Trend Lower In August

September 6, 2019

By Orbex

The Bureau of Labor Statistics will be releasing the monthly nonfarm payrolls report today. Economists forecast that the payrolls report for August will be a tad softer.

The US unemployment rate is forecast to remain steady at 3.7% in August. This marks an unchanged print from 3.7% in July.

The monthly nonfarm payrolls are forecast to rise in the range of 168k – 159k during the month. This follows a 164k headline print for July, which is subject to revision.

The average hourly earnings continue to remain steady, rising at a pace of 0.3% on the month. This marks the same pace of increase as the month before. On a yearly basis, average hourly earnings remain around the 3.1% – 3.2% range.


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U.S. Nonfarm payroll
US Nonfarm payrolls and unemployment rate

With inflation staying subdued, hourly earnings continue to outpace inflation.

The payrolls data come as the US heads into the Hurricane season. For the moment, the impact of Hurricane Dorian is uncertain on today’s payrolls report.

But depending on the intensity, it is likely that next month’s payrolls could be impacted quite a bit. Therefore, keep an eye out for the September report.

Today’s payrolls report comes ahead of the Fed meeting due in a couple of weeks. Investors have been betting that the central bank will be lowering rates in one of the meetings during the course of the year.

As a result, today’s payrolls report could well come under the scanner.

Will Tariffs Hit the Labor Market?

The US and China trade dispute is something that investors have been looking at. Even in the July report, focus was more on the impact of the higher tariffs. US businesses are expected to take a hit on account of higher tariffs.

The tariffs are expected to cut demand which eventually impacts the pace of hiring.

Trends in the manufacturing sector already signal the slowdown that is widely expected. In July, the payrolls data did little to shape the Fed’s expectations. The central bank lowered interest rates but reminded market participants that it was only an adjustment.

The Trump-administered tariffs of 15% come into effect from this month. As a result, any upside surprise in the August nonfarm payrolls report will likely be brushed aside. Investors will no doubt be keen to see how the labor market fares once the new tariffs come into effect.

Average Earnings Remain Muted

Average earnings will remain one of the key focus points. Hourly earnings have remained steady, neither rising nor falling. But due to the fact that inflation is muted, earnings have managed to put more money into the hands of consumers.

Average Hourly Earnings
Average Hourly Earnings y/y

Average earnings rose 3.4% on the year late last year. But since then, growth in the earnings has remained muted for the most part. Despite stagnant wage growth, it remains perched near historic highs.

This was evident from the recent personal consumption expenditure report. In July, the PCE rose 0.6%, rising quite significantly. But at the same time, there was a cause for concern. Household income rose just 0.1%.

The data gives a mixed picture overall. For the moment, investors remain somewhat cautious on the economy. But with the economic picture being mixed, it is rather uncertain to expect the economy to lose momentum even further.

Today’s payrolls report is unlikely to move the markets much. Focus will be on the September payrolls report, which could have some impact due to the trade tariffs as well as the hurricanes.

By Orbex