A poster announcing job ads is seen as people walk into the store in New York City, New York, USA, on August 6, 2021.
Eduardo Muñoz | Reuters
The August employment report is expected to show another strong month for hiring, but it could also take a look at the impact of the Covid-19 delta variant on the economy.
The jobs report, which will be released Friday at 8:30 a.m. ET, is also expected to provide key guidance for the Federal Reserve in the process of deciding when to start cutting its bond purchases.
According to Dow Jones, economists expect 720,000 payrolls to be added in August. It would be a strong number, but lower than the 943,000 in July. The unemployment rate is expected to fall to 5.2% from 5.4%, and average hourly earnings are expected to increase by 0.3% or 4% annually.
“I think the risks are very downward,” Lee Ferridge, head of macro strategy for North America at State Street Global Markets, said. “I’m not sure how much we’re considering the impacts of the delta.”
The forecasts for the report are broad, ranging from about 300,000 to one million.
“If you get a number that doesn’t live up to expectations, say 500,000 instead of 735,000, this will exclude a reduced ad in September, which is still consistent with the message [Fed Chairman Jerome] Powell ceded Jackson Hole, “Ferridge said.
A very small number would raise concerns about the strength of the economy, he said.
“I think the market is pretty divided if we get the ad next month or in November. If we get a weak number, it will make that ad come back around November,” Ferridge said.
On the other hand, a strong report on jobs could hurt stock prices on Friday morning. “A very strong number, I think, is at risk because we think, okay, it’s down to September,” Ferridge said. “This is harder for the market to escape. … We are in the strange world where the bad news is good news in terms of risk appetite. Anything that says we could see a more falconry central bank, is bad news “.
But, like economists, the Fed will also study whether there are indications that Covid will affect hiring and activity. The virus variant has been a wildcard for the economy, and its impact could be a factor influencing the Fed, as it considers the first step in the extraordinary relaxation policy it implemented to combat the pandemic.
Powell, who spoke at the Fed’s Jackson Hole Symposium last week, said central bank officials agreed they should start reducing their $ 120 billion a month bond purchase program this year. The president said he would still like to see more progress in the labor market before it slows down, so this employment report and the following have become extremely important contributions before the Fed meeting on May 22. September.
“I don’t think that’s a decisive number for the Fed, but it’s a vision of something we already know. That is, we’ve already lost quite a bit of momentum,” said Diane Swonk, chief economist at Grant Thornton. “It looks like consumer spending will come down in the third quarter and we knew the second quarter would be the peak of growth for the year.”
Swonk expects 675,000 jobs to be added in August, including 100,000 in education as schools reopen. But he adds that there are risks that the number may be lower than his estimate.
Goldman Sachs economists cut their forecasts this week to 500,000, from 600,000 after Thursday’s report on manufacturing data shows a contraction in jobs in August. The manufacturing index of the Institute for Supply Management rose to 59.9, a surprise gain, but the jobs component slipped 3.9 points to 49. A measure below the 50 indicates a contraction.
Swonk said Hurricane Ida and other storms could affect the data in September. “We have climate change clashing with Covid,” he said.
Wilmington Trust chief economist Luke Tilley has one of the lowest forecasts at 300,000. He said the high-frequency data he looks at indicates a slowdown.
“We believe that the spread of the delta and a certain slowdown in spending have a lot to do with it,” he said. “Expenditure on restaurants is reduced. You can see the trackers of daily spending. Spending on airlines and leisure went down from July.”
While some of this is normal throughout the summer travel season, Tilley said there is a larger trend developing. “We think we will see a slowdown. We are in the process of revising some of our GDP figures.”
But other economists are more optimistic about labor market progress. Amherst Pierpont chief economist Stephen Stanley expects 950,000 jobs to be added in August.
He called the employment statistics report by the Bureau of Labor Statistics “one of the most consistent in recent years,” as several Fed officials have said they would push for a reduced announcement at the September meeting if the report it is strong.
“I am looking for another solid report, which I hope will push the committee to announce the start of the reduction process in September,” he wrote in a note.
Stanley added that there have been anecdotal and survey data showing that companies are desperately trying to hire workers, but continue to find shortages.
“On the sidelines, the Delta wave has made some of the meshes stay on the sidelines a bit longer, but I doubt it has made a big difference in the set,” he wrote. The most important dynamic this summer has been the expiration of supplementary unemployment benefits. “
Stanley expects the trend to remain strong.
“Also, with school starting in most of the country in late August or early September and supplementary unemployment benefits expiring next week, I would look for employment growth to continue to increase over the coming months.” , Stanley pointed out.