The release of the US Nonfarm Payrolls (NFP) numbers for August due out shortly is very significant. Together with last month’s big negative revisions, the data have raised serious doubts about the near-term economic outlook. These figures are due out this Friday. They’ll provide essential context for what’s really happening on the ground with job creation and economic development in the United States.
In retrospect, given the recent and unexpected acceleration of these changes, the emphasis on hiring trends seems almost prophetic. The new NFP data confirms an August jobs gain of about 78,000. While this sounds small relative to historic numbers, it still represents positive job growth. The unemployment rate is expected to tick up to 4.3% from 4.2%, a sign that may portend darker days to come for American workers.
Importance of Recent Revisions
The last month’s Nonfarm Payroll revisions are heart stopping, with prior month’s estimates being revised down – bigly. This has added extra importance to the August report, making it necessary reading for policymakers and economists of all stripes. After adding an average of 254,000 new jobs need a master’s degree or higher—a growth! This figure stands in stark contrast to previous projections for a booming labor market.
Together, the revisions and projections should serve as a clear reminder of the volatility and unpredictability that is always present in economic data. A smaller increase in August’s Nonfarm Payrolls is anticipated, which could further complicate the narrative of a recovering job market. The strength of the economic calendar points to a surprise increase. That said, it will be much smaller than what had been hoped for.
Economic Indicators and Hiring Trends
The ISM’s Manufacturing Purchasing Managers’ Index (PMI) is one of the most closely watched economic indicators, and for good reason. This data is what heavily influences expectations for the NFP report.
Employment PMI component
The Employment component of the PMI dropped to 46.4 points signifying a contraction in hiring in that sector. This drop is particularly worrisome considering the steepness of the overall employment cliff affecting industries nationwide.
As a result, the implications for the broader economy are pronounced—with hiring trends weakening fairly consistently. The continuation of these negative trends is an ominous sign for the possibility of long-term, broad-based economic prosperity. As employers continue to rethink their hiring needs with the economic picture so cloudy, jobs growth could remain weak.
Impacts of Tariffs and Political Decisions
The economic landscape has been made more complex by recent political developments and trade policy. Just in March, an appeals court ruled that tariffs imposed by US President Donald Trump were illegal. There are longer-term ripple effects to economic sentiment and employer confidence that this decision will cause as well.
Trump’s move to fire the head of the Bureau of Labor Statistics (BLS) has understandably shocked many. This agency happens to be the one that compiles that all important Nonfarm Payrolls data. The long-term effects of this change in leadership on data integrity and accuracy are unknown. With all of these factors swirling about, the next NFP report will be a must watch for sure.