For the August employment report, scheduled for release on Friday, September 2, we look for nonfarm payrolls to rise 200k.We expect 190k of these gains to come from the private sector, and in particular service-providing employers, with government payrolls adding the remaining 10k. Initial jobless claims remained low through the August survey week, bolstering our confidence that service sector labor demand remains solid. Within the goods-producing sector, early indicators of manufacturing employment for August look weak and we would not be surprised to see another leg down in payrolls for the sector. This, alongside a continued decline in mining employment, may well lead to an overall contraction in goods-producing employment. Elsewhere in the report, we expect the unemployment rate will decline one-tenth to 4.8%, average hourly earnings to rise 0.2% m/m and 2.5% y/y, and the average workweek to be unchanged at 34.5 hours.
On balance, overall job growth of 200k would confirm the May dip in payroll growth was transitory and erase fears of a slowing labor market.
A strong August employment report also represents the last major data hurdle before the September FOMC meeting, where we continue to expect the Fed will raise rates. Thus, we view a strong August employment report as an absolute requirement for a September move by the Fed.
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