Job market seen somewhat weaker in August, as rehiring slowed and layoffs continued

The pace of rehiring is expected to have slowed in August, and the economy likely added fewer jobs than in July as workers continue to be laid off.

Economists expect 1.32 million jobs were added in August, and that the unemployment rate fell to 9.8%, according to a Dow Jones survey. That compares to 1.76 million job gains in July and an unemployment rate of 10.2%. The August employment report is expected to be released at 8:30 a.m ET Friday.

“Retail spending and durable goods orders are up. The economy is progressing,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “If that is the case, the labor market should follow demand in the economy. There’s still a gaping hole here. We lost 22 million jobs in March and April. It came back nearly 9.3 million in May, June, July so we’re still about 12 to 13 million short. You could easily get back 1.5 million in August. We’re just not sure what speed it’s coming back at.”

Rupkey said the $600 stimulus checks to unemployed individuals that ran out at the end of July could show up in slower spending in August, and that could impact the economy and jobs in September. Republicans and Democrats in Congress has been at odds over how much to spend to boost the economy, so programs for individuals and businesses hurt by Covid-19 have run out. Unemployed individuals in some states have been able to receive extra federal benefits of $300 a week temporarily.

“I do think the general assessment is the jobs number will show a further moderation in the pace of job creation, the degree of which is what’s up in the air,” said Michelle Meyer, head of U.S. economics at Bank of America. “There’s further growth. It’s just at a slower pace than in the early stage of the recovery.”

Meyer said she expects 1.2 million jobs in August, but 400,000 of those will be government jobs, as temporary Census Bureau hiring added many workers. In July, the government contributed 301,000 jobs.

“I think the labor flows are really large in both directions. There’s certainly hiring that’s going on, and at the same time there’s still firing as you can see in the claims data,” she said. The government reported 881,000 initial claims for state unemployment benefits were filed last week, the lowest number since March.

“I think there will be further addition to leisure and hospitality because that’s where the bulk of the job cuts were, but the incremental growth in those categories gets more difficult as we get away from the initial shock,” she said. “The goods side of the economy seems to be relatively strong.”

Meyer said she expects to see gains in construction and manufacturing jobs in August.