The US job market probably took a breather in August, slowing amid a summer lull and an escalating trade war, economists expect.
Even with a summer slowdown for new jobs, the US labor market remains tight. The unemployment rate is expected to be unchanged at 3.7%. It has been at or under 4% for 17 months in a row.
Economists expect wage growth will be slightly lower, too.
The employment report will be released Friday at 8:30 am ET.
Here are three things market experts will be looking for in Friday’s report.
First things first, the report is expected to show fewer jobs were added to the US economy in August than in July.
Nonfarm payrolls are forecast at 158,000 last month, according to the Refinitiv consensus forecast. That’s down from 164,000 in July, but still above the 140,000 three-month average.
“In a summer punctuated by trade-related market swings, the healthy US labor market has been a steady source of reassurance of the economy’s strength,” said Nela Richardson, Investment Strategist at Edward Jones.
But not all parts of the labor market will remain unscathed in a month with weaker numbers.
American manufacturing has slowed in past months and contracted for the first time in three years in August, according to the Institute of Supply Management.
“The July jobs report showed that the average hours worked and overtime declined for this sector, which is a presage to future layoffs,” said Richardson.
New jobs in manufacturing are expected to drop to 8,000 in August — half of what they were in July.
It’s not just about new jobs added: Manufacturers are cutting jobs too.
Last month’s job cuts in the United States overall were the fourth highest of the year, making it the worst August since 2009, according to executive outplacement and coaching firm Challenger, Gray & Christmas. Technology, health care and manufacturing are the sectors that cut the most jobs.
Investors will also focus on wage growth numbers, looking for any signs of a rebound in inflation, one of the key metrics the Federal Reserve looks at in setting monetary policy.
Average hourly earnings are expected to have eased to 3.1% for the year, just below the prior month’s level. The wage measure has been above 3% for 10 months in a row.
A higher-than-expected pace of wage growth could cast doubt on expectations that the Fed will cut interest rates again this month.
The central bank, which in July cut interest rates for the first time since the financial crisis, will meet in two weeks. Expectations for another cut are at 100%, heavily weighted towards a quarter-percentage point decrease, the same as July’s, according to the CME’s FedWatch tool.
Last week, the Fed’s preferred inflation measure, the personal consumption index, remained below the bank’s 2% target. Below-target inflation has been one of the Fed’s main justifications for adding stimulus.
“Still, while more jobs with slightly fatter paychecks paints a rosy picture for consumers, worries that the trade war will cost households more at the checkout has started to weigh on moods,” said Beth Ann Bovino, U.S. Chief Economist for S&P Global Ratings.
The University of Michigan’s consumer sentiment index showed that Americans are growing more concerned about the on-going trade war with China, which could be a problem for the consumer spending-driven US economy.