A comprehensive overview: Key points of the non-farm payroll report

Non-Farm Payrolls Expectations: +175,000 jobs, average hourly earnings up 0.3%, unemployment rate at 4.1%

Leading indicators suggest that this month's non-farm payrolls may be below expectations, with overall employment growth expected to be between 125,000 and 175,000.

When will the July non-farm payrolls report be released?

The July non-farm payrolls report will be released on Friday, August 2nd at 8:30 PM (Beijing time).

Non-Farm Payrolls Expectations

Traders and economists expect the non-farm payrolls report to show the U.S. created 175,000 net new jobs, with average hourly earnings increasing by 0.3% (3.7% annual growth), and the U3 unemployment rate remaining at 4.1%.

Non-Farm Payrolls Overview

With the Federal Open Market Committee (FOMC) meeting just two days away, you might think that Friday's non-farm payrolls report would have limited impact on the market; after all, the Fed will receive another employment report (not to mention another round of inflation data) before its monetary policy decision in September.

However, in this scenario, there may be greater potential for volatility than initially anticipated. In the Fed's monetary policy statement and Chairman Jerome Powell's press conference, policymakers have explicitly emphasized the "balance" of risks between a slowing labor market and elevated inflation. Specifically, Powell noted, "If the labor market unexpectedly weakens or inflation falls faster than expected, we are prepared to respond."

At the same time, the "Sam Rule" as a signal of economic recession—how much the unemployment rate rises from its 12-month low—is almost triggered, making this usually overlooked unemployment rate more important this month, especially if it rises from the current/expected 4.1% to 4.2%.

Regarding the non-farm payrolls report, traders and economists expect employment growth to slightly slow compared to the previous month, with wages and unemployment rate expected to broadly align with recent trends:

Non-Farm Overview

Non-Farm Payrolls Forecast

Readers who regularly follow our reports know that we focus on four historically reliable leading indicators to help predict each month's non-farm payrolls report, but due to changes in the economic calendar, we were unable to obtain the ISM Services PMI report before the non-farm payrolls report was released:

The ISM Manufacturing PMI employment sub-index fell from 49.3 last month to 43.4, reaching its lowest level since June 2020.

ADP employment report shows an addition of 122,000 net jobs, lower than the 155,000 from the previous month.

Finally, the four-week moving average of initial jobless claims remains at 238,000, close to the highest level in 11 months.

Combining the data and our internal model, leading indicators point to this month's non-farm payrolls report potentially being below expectations, with overall employment growth expected to be between 125,000 and 175,000, despite significant uncertainty in the current global context Regardless, the monthly volatility of this report is notoriously difficult to predict, so we won't put too much trust in any forecasts (including our own). As always, other aspects of the release, especially the highly anticipated average hourly wage data, are also important.

After declining this week, the US Dollar Index is approaching the middle of its 4-week range, leaving a balanced outlook for the world's reserve currency ahead of the non-farm payroll report. As traders have almost fully priced in expectations of a 25 basis point rate cut at each remaining FOMC meeting this year, if a strong employment report opens the door for the Fed to maintain rates in November or December, the dollar may have some upside potential