The Bureau of Labor Statistics (BLS) is set to release its first employment report this Friday. This comes after President Trump dismissed his BLS chief following disappointing job figures in July.
Economists are forecasting weaker labor market conditions for August, which might provoke further criticism and backlash from Trump.
“The August employment report is likely to show a notable slowdown in the labor market,” Gregory Dako, chief economist at Ey-Parthenon, mentioned in a preview.
Dako anticipates only a 40,000 increase in non-farm payrolls for August, which follows a modest 73,000 jobs added in July. He also believes the unemployment rate has risen to 4.3%, the highest point since October 2021.
Financial media outlet Bankrate shares this outlook, predicting a 4.3% unemployment rate and an addition of about 80,000 jobs in August. Meanwhile, the Wall Street Journal estimates the job growth at 75,000. To keep pace with population growth, the economy needs to generate between 80,000 and 100,000 new jobs monthly.
The July report indicated an average increase of just 35,000 jobs for May through July.
This decline was echoed in a recent survey showing that for the first time since 2021, the number of job seekers outstripped available jobs. Currently, there are about 7.18 million open positions, while 7.24 million people are employed.
“Job numbers were below expectations and nearly back to pre-pandemic levels,” stated Eugenio Aleman, an economist with Raymond James. He noted that July’s job growth was primarily in healthcare and social assistance, a strong sector historically.
The firing of Trump’s former BLS commissioner, Erica Mantelfer, has drawn widespread censure from the economics community, with voices from across the spectrum condemning the decision.
William Beach, another former BLS commissioner, labeled the firing as “completely unfounded” and warned of creating a “dangerous precedent.”
Since the pandemic, BLS survey response rates have been declining, impacting the reliability of labor market research, although many agree that the institution’s methodology remains credible.
Recent commentary from Yale’s Budget Lab director, Elnie Tedeski, notes that preliminary BLS non-farm payroll estimates have been increasingly accurate since the 1990s.
Management officials have expressed doubts about the reliability of future BLS data after Mentarfer’s dismissal.
“A lot needs to be done to enhance the reliability of the numbers,” said Kevin Hassett, director of the White House National Economic Council. “While they’re as good as they can be, there’s room for improvement.”
This situation has raised alarms about the politicization of economic data, closely monitored by businesses and governments to gauge economic trends.
Trump has appointed Ej Antoni to replace Mentarfer, who was also terminated. Critics claim those economists in power are often more aligned with conservative viewpoints than with conventional statisticians.
There’s been some pushback against Antoni as well. Economist Dean Baker criticized him for his misunderstanding of important data aspects related to tariffs.
Aside from the upcoming August report, more disappointing employment data could emerge. An annual benchmark revision from the Labor Bureau is slated for release soon. These benchmarks are standard procedures to align survey estimates with actual population figures.
Nomura, an investment bank, is predicting a downward revision of 600,000 to 900,000 jobs for the April 2024 to March 2025 period, while Pantheon Macro expects around 750,000 job losses due to these adjustments.
Moreover, employment conditions are taking on unusual characteristics. Federal Reserve Chair Jerome Powell referred to them as “curiosity,” highlighting a situation where low employment and low inflation typically lead to economic shifts but have remained stagnant for over a year.
“It’s essential to discuss this carefully,” noted Claudiatherm, chief economist for New Century Advisors.
“This situation can’t sustain itself indefinitely, but it might suggest a new approach to human resources,” she mentioned.
In a recent CNBC interview, Federal Reserve board member Christopher Waller expressed his worries about an impending downturn in the job market unless interest rates are reduced at the next policy meeting in September.
“When the labor market worsens, it doesn’t take long for it to escalate… I believe we need to start cutting rates soon,” he explained.
There’s also the concern that job growth has been heavily concentrated in specific sectors like healthcare and social support, overshadowing overall employment growth.
The latest labor recovery survey indicated potential reductions of 181,000 job openings in these concentrated areas, which might indicate a less robust labor market.
“This concentration creates a fragile labor market, as it’s heavily reliant on specific sectors,” Sahm mentioned. “Such concentration poses risks and may not be ready for significant demand shocks.”
