Wolfe Research expects the U.S. economy to have added 65,000 nonfarm payrolls in August, slightly above the consensus forecast of 55,000, as investors assess the labour market ahead of the Federal Reserve’s September policy meeting.
The firm also forecasts the unemployment rate rising to 4.16% from 4.09% in July. Average hourly earnings are expected to increase 0.35% month-on-month, exceeding the consensus estimate of 0.2%.
Private Hiring Expected to Offset Government Job Losses
Wolfe’s headline payroll forecast consists of an expected 75,000 increase in private-sector employment and a decline of 10,000 government jobs.
The firm believes the underlying pace of hiring remains close to a monthly breakeven level of approximately 65,000 jobs. That estimate is broadly consistent with the year-to-date average payroll increase of 61,000.
Recent weakness has been particularly evident in leisure and hospitality, where employment fell by 43,000 in June and another 40,000 in July.
Wolfe attributed those declines partly to seasonal effects and the reversal of employment gains associated with the World Cup. The firm expects seasonal factors to become more supportive from August and forecasts leisure and hospitality employment increasing by 5,000.
Wage Growth Could Exceed Market Expectations
Average hourly earnings are forecast to rise 0.35% from July, compared with the 0.2% increase expected by consensus.
On an annual basis, however, wage growth is projected to moderate to 3.1% from 3.2% in the previous month.
Wolfe noted that the August employment survey week includes the 15th of the month, which could help capture pay increases introduced around the middle of the month and contribute to a stronger monthly earnings figure.
Unemployment Rate Forecast to Rise to 4.16%
Wolfe expects the unemployment rate to increase to 4.16%, partly reflecting anticipated volatility in the Household Survey.
The U.S. labour force has contracted by approximately 2.5 million people so far this year, according to the firm, with around 1 million of that decline occurring during the past two months.
These movements have complicated the interpretation of headline employment indicators and could contribute to further volatility in the August unemployment figures.
Payroll Benchmark Revisions Could Add 180,000 Jobs
The Bureau of Labor Statistics is scheduled to publish its annual benchmark revisions to nonfarm payroll figures on August 28 at 10 a.m. ET.
Wolfe expects the revisions to add approximately 180,000 jobs to previous estimates, equivalent to roughly 15,000 additional jobs per month.
The forecast reflects data from the Quarterly Census of Employment and Wages, which Wolfe said has recently been running slightly stronger than the nonfarm payroll series.
Inflation Data Remains Key for September FOMC Decision
Despite the importance of the August employment report, Wolfe believes inflation figures are likely to carry greater weight in determining the outcome of the September Federal Open Market Committee meeting.
Producer Price Index data is scheduled for September 10, followed by the Consumer Price Index on September 11.
With the Fed’s September decision expected to depend heavily on those inflation releases, Wolfe believes the August payroll report would probably need to deliver a substantial surprise to materially alter current market expectations for monetary policy.