US jobs growth forecast to have slowed again in August

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Jobs growth in the US is forecast to have slowed in August, a further sign of cooling in the world’s biggest economy that would add to expectations that the Federal Reserve will hold off on further interest rate rises this year.

Economists surveyed by Bloomberg predicted the US economy added 170,000 new non-farm roles over the month, which would mark the third consecutive month of gains below 200,000.

Investors and policymakers are watching closely for signs of easing in the US labour market, as jobs and wage growth are key contributors to inflation.

The Bureau of Labor Statistics will publish its latest official figures at 8.30 Eastern Time on Friday.

Although the headline growth number is expected to slow, the unemployment rate is forecast to remain steady near multi-decade lows at 3.5 per cent.

Average hourly wages are forecast to rise 0.3 per cent month on month and 4.3 per cent on an annual basis, a slight decrease on the previous month but well above the levels considered consistent with hitting the Fed’s 2 per cent inflation target.

Inflation has fallen dramatically from its peak of more than 9 per cent last year, with the headline rate of consumer price inflation most recently at 3.2 per cent in July.

However, economists have cautioned that continued strength in the labour market could make it difficult to close the remaining gap to hit the Fed’s inflation target.

“A resilient labour market has been one of the clearest risks to a sustained easing in inflation,” noted Citi economists Andrew Hollenhorst and Veronica Clark earlier this week. “Most officials [expect] some loosening of the labour market and rise in the unemployment rate even in an ideal ‘soft landing’ scenario.”

Separate data published earlier this week suggested labour demand is easing, with the number of job vacancies falling further than expected.

The vast majority of investors expect the central bank to keep rates steady at its next meeting in late September, but the outlook for the rest of the year is less certain. Futures markets were pricing in a slightly less than 50 per cent chance that rates rise by the following meeting in November.

In his annual speech at the Fed’s economic symposium in Jackson Hole, Wyoming last week, Fed chair Jay Powell stressed that the central bank was “prepared to raise rates further if appropriate”, but said policymakers would be cautious as they try to balance controlling inflation with minimising damage to the broader economy.