Goldman Sachs Forecasts 60,000 August Non-Farm Payrolls Increase

Goldman Sachs has forecasted that the non-farm payrolls for August will increase by 60,000, which is below the market consensus of 75,000 but above the recent three-month average of 35,000. This prediction reflects a continuous improvement trend in private sector employment, with an expected increase of 80,000 jobs in the private sector. However, this is offset by a reduction of 20,000 jobs in the federal government. The recent ADP employment report showed that private sector employment increased by 54,000 in August, slightly below market expectations. This figure is the lowest growth rate since January 2025 and is less than half of the 106,000 jobs added in July. The ADP report also indicated a dangerous signal: middle and small enterprises added fewer jobs.

Goldman Sachs analysts have highlighted that while overall growth remains sluggish, alternative data indicators suggest a continuous improvement in private sector employment. These indicators, which include the Census Bureau's Business Pulse Survey, ADP employment data, and Homebase, among others, provide a relatively optimistic basis for the prediction. The improvement is primarily seen in the service sector and certain manufacturing industries, indicating that corporate hiring activities are gradually recovering, although the growth rate remains below historical averages.

Historical data shows that August non-farm payrolls have consistently shown a downward trend in their initial releases compared to the previous three months' moving average. Over the past 15 years, August data has fallen short of market expectations in 10 instances, primarily due to mismatches in seasonal adjustment factors. However, final revised data typically shows an upward adjustment of 61,000 jobs, mainly through non-seasonal adjustments, indicating that companies' later-reported employment data is often more positive.

In the government sector, Goldman Sachs expects a decrease of 20,000 federal government jobs. The federal government hiring freeze, which has been extended from July 15 to October 15, continues to put pressure on federal government employment. Meanwhile, state and local government jobs remain stable, with job openings in Washington D.C. decreasing by 17% since the federal hiring freeze was implemented.

The upcoming employment report is expected to provide timely evidence of the impact of various government policies on the labor market. Tariff policies may continue to exert pressure on manufacturing jobs, with an average monthly decrease of 12,000 jobs over the past three months. Federal government layoffs will directly result in a reduction of federal jobs, and federal spending cuts may have spillover effects on state and local governments, as well as the healthcare and education sectors. Since February, federal government jobs have decreased by an average of 14,000 per month. Tightened immigration policies may also affect industries that rely heavily on immigrant labor, with the second-quarter job growth in these industries being only 4,000, far below the 27,000 average for 2024.

Goldman Sachs predicts that the unemployment rate will rise slightly to 4.3% in August, up from 4.248% in July. This prediction is based on the continued weakening of other labor market slack indicators, such as the Conference Board's labor market differential index and the two-week moving average of continuing unemployment claims. The Conference Board's labor market differential index, which measures the difference between the proportion of people who say jobs are "plentiful" and those who say jobs are "hard to get," fell by 1.3 percentage points to 9.7 in August, the lowest level since February 2021 and well below the 33.2 average for 2019. This decline reflects a cooling labor market in the U.S. and may indicate economic slowdown or rising job pressure. However, analysts believe that the abnormal increase in the unemployment rate for new entrants to the labor market in July may partially reverse in August, putting downward pressure on the unemployment rate. The number of new entrants to the labor market who are unemployed rose significantly in July and may return to normal levels in August.