leading indicators point to a potentially above-expected reading in this month’s jobs report, with headline job growth coming in somewhere in the 75-125K range, with a chance the report tips the scales on the FOMC decision later this month.
NFP Key Points
- NFP report expectations: +55K jobs, +0.3% m/m earnings, unemployment at 4.1%.
- NFP leading indicators point to a potentially above-expected reading in this month’s jobs report, with headline job growth coming in somewhere in the 75-125K range.
- The US Dollar Index () is holding roughly in the middle of the year-to-date range, though with today’s selloff, it’s nearing the lowest level it has traded at since mid-May.
When is the August NFP Report?
The August NFP report will be released on Friday, September 4, at 8:30 ET.
NFP Report Expectations
Traders and economists expect the NFP report to show that the US created 55K net new jobs, with average hourly earnings rising 0.3% m/m (3.0% y/y) and the U3 at 4.1%.
NFP Overview
Last month’s jobs report changed the conversation around the US labor market. The outright decline in jobs (-23K) and negative revisions to previous reports raised concerns about the start of an AI “jobpocalypse” and potential stagflation down the road, at the same time that the Federal Reserve turned in a decidedly more hawkish direction amidst elevated price pressures.
Perhaps surprisingly against that backdrop, traders are anticipating a reasonably solid report this month:
Source: StoneX
As the graphic above shows, expectations are for a return to positive territory, with modest job growth, stable unemployment, and continued gradual wage increases.
With holding well above the Federal Reserve’s 2% target, traders are pricing in another interest rate hike from the Federal Reserve as soon as this month, with the CME’s FedWatch tool showing about a 60% probability of such a move, after Chairman Warsh struck a relatively hawkish tone at the Economic Symposium last month:
Source: CME FedWatch
NFP Forecast
As regular readers know, we focus on four historically reliable leading indicators to help handicap each month’s NFP report:
- The subindex rose to 51.2 from 51.8 last month.
- The subindex ticked higher to 47.8 from 47.4 last month.
- The Employment report came in at 38K jobs, down incrementally from last month’s 46K reading.
- The 4-week moving average of fell to 207K, up from 199K last month.
Weighing the data and our internal models, the leading indicators point to a potentially above-expected reading in this month’s jobs report, with headline job growth coming in somewhere in the 75-125K range, albeit with a big band of uncertainty given the limited response rates.
Regardless, the month-to-month fluctuations in this report are notoriously difficult to predict, so we wouldn’t put too much stock into any forecasts (including ours). As always, the other aspects of the release, including the closely watched average hourly earnings figure and unemployment rate will also impact how markets react to the release.
Potential NFP Market Reaction
Technically speaking, the US dollar is trading near its lowest level in three months, but off the lows from the start of last week, leaving the technical outlook relatively balanced.
US Dollar Index Technical Analysis – DXY Daily Chart
Source: TradingView, StoneX
As the chart above shows, the US Dollar Index (DXY) is holding roughly in the middle of the year-to-date range, though with today’s selloff, it’s nearing the lowest level it has traded at since mid-May. Technically speaking, there’s not a clear directional trend across the medium-term as traders await more clarity on the Fed’s reaction function under Chairman Warsh.
Accordingly, a strong jobs report that alleviates any concerns about the labor market would increase the odds of a rate hike in less than two weeks’ time, likely boosting the greenback and bringing the 50-day EMA in the upper-99.00s back into sight. Conversely, a weak jobs report could give Warsh and Company an excuse to hold off for another meeting, weighing on DXY and putting the 3.5-month low at 98.50 under pressure.
