Week Ahead: All About the August US Jobs Data!

July’s employment report painted a sobering picture, with a mere 73,000 positions added to the US workforce – a figure that fell markedly short of expectations and represented a pronounced deceleration from the momentum seen in June. Interestingly, this was also the first softer-than-expected payroll print since March.

However, you will recall that it was the chunky downward revisions that raised eyebrows, with May and June revised lower by 258,000 payrolls (May was revised lower by 125,000 from 144,000 to 19,000, and June was revised down by 133,000, from 147,000 to 14,000). Accompanying these meagre revisions was the 3-month average of just 35,000 payrolls, reflecting a considerably slower pace of hiring in the US.

On the back of the July figures, this resulted in US President Donald Trump firing the Commissioner of the Bureau of Labor Statistics, Erika McEntarfer, after he claimed the jobs data were ‘rigged’ to make the Republicans, and himself, look bad. In my view, Trump overstepped the line here. Although I hold no political bias whatsoever, he did a good job of making himself ‘look bad’ after firing McEntarfer, as I believe she has no influence over the final payroll figures. All he achieved was to undermine trust in a very important economic data point.

Economists Expect Subdued Payroll Growth in August

Economists expect August payrolls to remain subdued at 75,000, down from 73,000 in the previous month (LSEG data – below). The forecast distribution for the release ranges from a high of 110,000, as projected by Deutsche Bank, to a low of 0, according to Scotiabank.

In terms of private payrolls, analysts are also expecting a softened print of 75,000, down from 83,000. The unemployment rate is forecast to have increased to 4.3%, from 4.2%, and wages are expected to have remained steady at 0.3% MM, though eased to 3.7% (from 3.9%) YY.

These estimates align with recent comments from Federal Reserve (Fed) officials, which highlighted that the US is in a ‘low hire, low fire’ mode. Additionally, this aligns with weekly jobless claims data. As shown on the chart below, although marginally off lows, unemployment claims are not signalling any red flags that suggest widespread layoffs. Continuing job claims further reinforce this picture, trending higher since bottoming out in 2022 and indicating that it is now proving more difficult to find employment.

What Does This Mean for the Upcoming Fed Rate Decision?

The central bank is in a tricky spot, with ongoing debate among policymakers about whether inflation will be a one-time spike or more persistent. In his speech at Jackson Hole earlier this month, Fed Chair Jerome Powell noted there was a reasonable case to be made that inflation would be ‘relatively short-lived – a one-time shift in the price level’. Time will tell how that unfolds.

The point is that, right now, we have real GDP (Gross Domestic Product) growing at a healthy clip, inflation remains persistently above the Fed’s 2.0% target, and the labour market has softened.

According to the second estimate released last week, real US GDP grew at an annualised pace of 3.3% in Q2 25, marking an upward revision from the initial estimate of 3.0%. It also surpassed the 3.1% median forecast, signifying that the economy is in better health than previously feared. However, growth in the first half of the year remained slower than in previous years.

Last week also culminated in the widely anticipated US PCE inflation release (Personal Consumption Expenditures), which came in line with consensus. The report showed that price pressures were not trending lower, but it did not deliver much upside surprise either. YY headline inflation remains steady at 2.6% and YY core inflation ticked up to 2.9% (from 2.8%). Personal spending in July increased by 0.5% from 0.4% in June, while personal income rose by 0.4% from 0.3%, and wages and salaries increased by 0.6% from 0.1%.

The mixed PCE data released is unlikely to do little to sway the existing divisions within the Fed. While the central bank technically uses the headline PCE release to target inflation (it is not the core reading, as some state), the market’s focus will now be on the upcoming jobs report this week and the CPI (Consumer Price Index) and PPI (Producer Price Index) data released in about a fortnight.

Should job numbers come in much stronger-than-expected, this could raise questions about the upcoming rate decision and shine a rather bright spotlight on the pace of easing following September’s meeting. Robust employment data may also pave the way for some solid moves to the upside in the US dollar (USD) and Treasury yields, while weighing on Stocks as markets reassess rate pricing. On the other hand, weaker job growth and higher unemployment – particularly if the jobless rate nudges above 4.3% – would cause some concern at the Fed and potentially send USD/yields south.

The Week’s Supporting Cast

Ahead of Friday’s key data, the July JOLTS job openings (Job Openings and Labour Turnover Survey) data will be released on Wednesday, as well as the August ADP private payrolls (Automatic Data Processing) and weekly jobless claims data for the week ending 30 August, on Thursday. These reports could also offer scalping opportunities in the lead-up to Friday’s report. The ISM (Institute for Supply Management) surveys, published on Tuesday for manufacturing and Thursday for services, will also offer additional insights into the current state of the US economic landscape, particularly following the recent implementation of tariffs.

Technically, the USD index remains rangebound between daily support and resistance at 97.72 and 98.58. A breakout lower is bolstered by the fact that monthly flow recently rejected resistance at 99.67 and has room to reach for channel support, extended from the low of 72.70.

Ultimately, I will be watching the daily range closely leading up to the jobs report, as space outside of this consolidation suggests room to rally (fall) as far north (south) as resistance (support) at 100.54 (95.67).

Written by FP Markets Chief Market Analyst Aaron Hill