US nonfarm payrolls likely increased in August, service sector labor demand to be strong

The US employment report for the month of August, which is set to release early next month, is expected to report an increase in nonfarm payrolls. According to a Barclays report, the nonfarm payrolls are expected to rise 200k.

“We expect 190k of these gains to come from the private sector, and in particular service-providing employers, with government payrolls adding the remaining 10k”, added Barclays.

Initial jobless claims continued to be low through the survey week in August, reinforcing the view that labor demand in service sector continues to be robust. In the goods-producing sector, early indicators of manufacturing employment for August seem subdued. The sector is expected to register another decline in payrolls, according to Barclays.

This, along with a persistent drop in mining employment, might result in a goods-producing employment to shrink. Elsewhere in the report, the jobless rate is likely to fall one-tenth to 4.8 percent, while average hourly earnings is expected to rise 0.2 percent month-on-month and 2.5 percent year-on-year, stated Barclays. Also, the average workweek is expected to remain the same at 34.5 hours.

“On balance, overall job growth of 200k would confirm the May dip in payroll growth was transitory and erase fears of a slowing labor market”, noted Barclays.

A solid employment report for the month of August also shows that the last major data obstacle before the September FOMC meeting, where the US Fed is expected to hike rates, according to Barclays.