Market Insider

Jobs market may be booming but the August employment report could still disappoint

Key Points
  • Economists expect 191,000 jobs were added in August, but if this summer is like others, that number could miss the mark.
  • Companies are typically slow to report August hires, due to vacationing workers, and the number is often revised higher later.
  • There could be some rebound in retail, after the closing of 800 Toys R Us stores resulted in a surprise miss of about 30,000 in July payrolls.  
Retail employees help customers at the checkout registers inside a store in Torrance, California.
Patrick T. Fallon | Bloomberg | Getty Images

If history is repeated, there could be some disappointment with the August employment report, even though hiring appears to be strong and the job market solid.

Economists expect 191,000 nonfarm payrolls were added in August, following 157,000 in July, according to Thomson Reuters. The unemployment rate should dip to 3.8 percent form 3.9 percent, and wages are expected to rise 0.2 percent.

But some economists expect a lower number of new jobs when the numbers are reported on Friday, due to past performances in August. ADP's private payroll report also missed the mark Thursday, with just 163,000 payrolls compared to 190,000 that were expected.

"It's just due to some of the quirks of August. The street has overestimated August payrolls for seven years running now," said Ward McCarthy, chief financial economist at Jefferies.

Mark Zandi, chief economist at Moody's Analytics, says he sees just 170,000 jobs and he also blames August.

"It should be a little on the soft side, but for technical reasons. The August first print comes in soft. It's generally, I think related to the fact that there are fewer respondents in August," he said. Zandi said the August payrolls are often revised higher, by 25,000 or 30,000 jobs as more data is collected.

He said the job market remains vigorous and hiring is strong, except for some issues at small employers. "Small companies are not hiring as much. They're struggling to find people. They can't compete with the big companies," said Zandi.

Some economists, however, say there is one reason August could come in strong and look better than July, which missed forecasts.

Barclays U.S. economist Pooja Sriram said she expects 200,000 payrolls were added, including payback from the dip in July due to job losses from the bankrupt Toys R Us stores, which shut 800 stores.

Economists had been expecting 190,000 in July. The retail category gained a net 7,000 jobs, but in retail there was a large reduction of 32,000 jobs losses in hobby, toy and game stores.

"Barring what happened last month, which was due to a transitory factor, it seems like we could have a slightly stronger number," she said.

Wage growth in August is expected to rise at about the same pace as in July, up 2.7 percent on an annual basis.

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