The hours are ticking by until the Bureau of Labor Statistics releases the latest U.S. jobs report at 8:30 a.m. ET Friday, and it’s poised to be a game changer.
In fact, The New York Times reported Thursday that the monthly report (covering August) could “be the most pivotal one in years,” and USA Today said it could either ease recession concerns or fuel them. CNBC said it’s going to be “huge.”
So, why is this one so important?
For one thing, it could help clear up something that happened last month. Data showed that there was an uptick in the unemployment rate in July, and Audacy reported on how more Americans were looking for jobs than they had been in a decade. According to The Times, the new report will reveal whether this “was a blip or the start of a problematic trend,” and whether it signals an impending recession.
It will also be the last jobs report ahead of the Federal Reserve Bank’s Federal Open Market Committee later this month. During that meeting, the committee could decide to lower interest rates.
As U.S. consumers have struggled with inflated prices for goods and services in the wake of the COVID-19 pandemic, the Fed raised interest rates in an effort to tame inflation. However, higher interest rates also make it more expensive to borrow money, putting added pressure on consumers.
Concerns about the economy and inflation have been at the top of voters’ minds this year as the presidential election season heats up. While Gallup polling from late last month found that Americans’ outlook for the U.S. economy improved, views of the current economic conditions remained the same. Also, the percentage of people who thought it was improving was just 31%, compared to 63% who said it was getting worse.
A Consumer Price Index report from last month showed that 12-month inflation did finally dip lower than 3%, and the Fed is looking for it to reach 2%. A new release covering August inflation will be out next Wednesday, about a week before the FOMC meeting.
USA Today said the job numbers “could have an outsized impact on a volatile stock market,” and it also quoted economist Michael Reid of RBC Capital Markets, who said it will be “the most closely watched employment report in some time.”
For those watching the report closely – what are they looking for exactly? USA Today explained that economists are expecting a rebound from those July numbers. Disappointing numbers for July could be related to too-high expectations, hurricanes, seasonal changes in the auto industry and more, said USA Today. The Times also noted that the election could be impacting hiring, since employers might be waiting to see which candidates economic plans will win out before they decide to hire new people.
Per a Bloomberg survey cited by the outlet, that generally means they are looking for U.S. employers to add 165,000 jobs and for the unemployment rate ticking down to 4.2%. However, USA Today also said “that Jason Ware, chief economist and chief investment officer at Albion Financial Group, doesn’t expect the Fed to lower its key interest rate by more than a quarter point unless August job gains fall below 100,000 and the unemployment rate rises further.”
The New York Times said that the size of the rate cut will depend on the jobs report and that it is “rare” for this decision to be determined by a single data point.
“It matters a lot,” said Julia Coronado, founder of MacroPolicy Perspectives, a research firm, according to the outlet. “It’s going to set the tone for the Fed, and that’s going to set the tone for global monetary policy and markets.”
What will the report show? As the U.S. waited for it Thursday, related “appetizer” data caused U.S. stocks to wobble, Yahoo Finance reported. It said data from the ADP showed that private employers in the U.S. posted their smallest monthly hiring growth since January 2021 and that private payrolls grew by about 99,000, below expectations. Government data from Wednesday also showed job openings slumped.
Still, we won’t know for sure until Friday.