What To Expect From Friday's Jobs Report

Hiring likely bounced back in August if forecasters are correct about a government report on the labor market set for Friday.

Friday’s report on jobs by the Bureau of Labor Statistics is expected to show employers added 161,000 jobs, with the unemployment rate falling a tenth of a percentage point to 4.2% from July, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.

On Thursday, a number of other reports on the job market by non-government entities potentially set the stage, signaling that the job market is slowing down. Private employers added the fewest jobs in more than three years, more people filed for unemployment last week than expected, and layoffs in August were nearly triple those in July. However, economists and analysts often view these reports as less comprehensive than the BLS's numbers.

What Would It Mean For the Fed?

The BLS numbers are projected to recover from the 114,000 jobs added in July in a signal that July’s downshift was at least partially a fluke. But the report could have significant implications for the Federal Reserve’s interest-rate decision later this month and at future meetings if it reinforces the idea from recent data that cracks are forming in the labor market. 

Higher unemployment, or less job growth than forecast, could convince Fed officials that they need to take aggressive action to stop the jobless rate from rising. This could spur central bankers to cut the influential Fed funds rate by 50 basis points rather than the 25-point cut that financial markets widely anticipate for the Fed’s next meeting in September. 

The Fed is set to meet three more times this year. As of Tuesday afternoon, markets were pricing in a 73% chance that at least one of those meetings will result in a 50-basis-point rate cut, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. 

“If we do see a couple months of weaker numbers, that could move the needle toward a 50-point cut in either November or December,” said Ben Ayers, senior economist at Nationwide, in an interview. 

Labor Market May Be Feeling Effects of Restrictive Monetary Policy

The unemployment rate has risen for each of the past four months, stoking concerns that the Fed’s high interest rates — intended to slow the economy and counteract high inflation — are hurting the labor market, which until recently was an economic bright spot.

Fed officials have signaled the central bank is on the verge of cutting its influential Fed funds rate from its highest level since 2001 after holding it there for more than a year. That would put downward pressure on interest rates for mortgages, car loans, and other borrowing and would be the first rate cut since the pandemic hit in 2020.

The Fed has been balancing its dual missions of stabilizing consumer prices while preventing unemployment from spiking, trying to set its interest rate at a level that would keep a lid on inflation without dragging down the economy so much that it causes mass layoffs.

While unemployment rates aren’t high by historical standards, last month’s jobs report showed a sharp hiring slowdown in July, with the unemployment rate rising fast enough to set off a historically reliable indicator that a recession is imminent.

However, several economists said that data could have been distorted by the temporary impact of Hurricane Beryl rather than worrisome long-term trends in the job market—and expect Friday’s report to show a resurgence of hiring.

Update, Sept. 5, 2024: This article has been updated with labor data released Thursday.