U.S. August Nonfarm Payrolls Expected to Remain Weak, Unemployment Rate May Reach Highest Since 2021

　　Economists expect that the non-farm payroll report to be released on Friday will show that U.S. employment growth continues to be the weakest since the pandemic, removing the last bit of suspense regarding a Federal Reserve rate cut.

　　According to the median forecast of economists surveyed by Bloomberg, non-farm payrolls in August are expected to increase by 75,000, marking the fourth consecutive month of gains below 100,000. The unemployment rate is expected to rise to 4.3%, the highest level since 2021.

　　In recent months, U.S. employment growth has slowed significantly, and it is expected that the increase in non-farm payrolls in August will be below 100,000 for the fourth consecutive month.

　　In recent months, businesses have been increasingly concerned about ongoing economic uncertainty brought by consumer demand, cost prices, and trade policies, leading to a noticeable slowdown in hiring activity. This puts greater pressure on Federal Reserve officials, who need to take action to support the slowing labor market.

　　Gregory Daco, Chief Economist at EY-Parthenon, expects that private sector job growth will be mainly driven by healthcare, leisure, and hospitality industries.

　　Economist Anna Wong stated that after the thawing of federal education funding, local government hiring will boost overall employment data.

　　According to ADP data released on Thursday, private sector employment in August increased by only 54,000, below expectations.

　　The non-farm payroll report for July, released on August 1, showed that employment growth in recent months was far weaker than previously reported, changing the views of many economists and policymakers on the labor market. The significant downward revision of the data prompted Trump to suddenly fire the head of the Bureau of Labor Statistics, an action that raised concerns about the integrity of U.S. data.

　　Bank of America economist Shruti Mishra said, "Given the number of revisions so far in 2025, the number of new jobs added in July may also be revised downward. If so, it may indicate that the weakness in the labor market is more severe than we predicted."

　　The Bureau of Labor Statistics will release preliminary benchmark data revisions next Tuesday, which could cut hundreds of thousands of jobs from the year ending in March.

　　Impact on the Federal Reserve

　　Daco stated in a report, "As labor market conditions become increasingly fragile, Federal Reserve Chairman Powell is open to rate cuts, and a weak August employment report will further strengthen the case for a rate cut."

　　Other indicators and surveys also show that the labor market is weakening. Data released on Wednesday showed that U.S. job vacancies in July fell to a 10-month low. Analysts at Evercore ISI said this makes it less likely that the non-farm data will reverse the possibility of a rate cut in September.

　　Government data released on Thursday showed that the number of Americans applying for unemployment benefits last week rose to the highest level since June. Data from Challenger, Gray & Christmas showed that planned hiring in August fell to the weakest level on record, while layoff intentions increased.

　　An especially weak employment report could even prompt the market to bet on a larger rate cut this month. Zachary Griffiths, head of investment grade credit and macro strategy at CreditSights, said that if the increase in jobs in August causes the three-month average monthly job growth to remain below 50,000, it may be enough to trigger a rate cut.

　　Pricing of futures contracts shows that Federal Reserve officials are very likely to lower the benchmark interest rate by 25 basis points at the meeting on September 16-17. However, it is still unclear what action the Federal Reserve will take at subsequent meetings.

　　Wells Fargo senior economist Sarah House said that given persistent inflation and a weakening labor market, policymakers are caught between the two major goals of employment and price stability. Differences among Federal Open Market Committee (FOMC) members may also increase.

　　However, she expects that the labor market will become the main determining factor for interest rate decisions in the coming months.

　　House said: "At least in the near term, the path of monetary policy will depend more on changes in the employment market. The labor market may change more quickly."