Nail-Biting Time for Stock Market as Jobs Report Looms

So maybe the weak July jobs-growth report was an anomaly. Or maybe it was a portent. Those are the uncertainties bedeviling investors ahead of the August report’s Friday release. The July report fueled anxieties about a downward economic spiral, which, of course, would be horrible for the stock market.

Job growth has decelerated in 2024, but the July report showed a worrisomely steep drop, with just 114,000 non-farm jobs created—off from 179,000 in June and 216,000 in May, not to mention the 215,000 average gain over the previous 12 months. From June to July, unemployment increased 0.2 percentage points to 4.3%, up from 3.5% 12 months before.

Hovering over the jobs report is the question of a recession, an anxiety that has ebbed and flowed in the public mind for the past two years. For investors, the most concerning aspect of the report is its influence on the stock market. In this first week of September, historically the worst month for equities, the S&P 500 has dipped, interrupting an August rally. By Thursday’s close, the index was off 2.6% since the last day of August.

For August, the economists’ consensus, per a Bloomberg survey, is that the U.S. economy added 163,000 jobs and the unemployment rate notched down to 4.2%. This would be the first drop in the jobless rate since March.

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The report, to be released at 8:30 a.m. ET on Friday by the U.S. Department of Labor, covers how many jobs were created the previous month, as well as worker pay boosts and the number of Americans unemployed.

To be sure, the July jobs report may have been distorted by bad weather, especially Hurricane Beryl, which battered the Gulf Coast that month, says Michael Arone, chief investment strategist for U.S. SPDR business at State Street Global Advisors, in an interview.

Meanwhile, there are several signs lately of a cooling labor market. Companies hired just 99,000 workers in August, fewer than July’s 111,000 ( a downward revision) and than the consensus forecast of 140,00, reported payrolls processing firm ADP. In addition, layoffs soared in August, reached their largest total for that month in 15 years, according to a survey from employment agency Challenger, Gray & Christmas.

The August jobs report surely will also have an effect on Federal Reserve policymakers’ September 17 to 18 meeting, when they will weigh how much to cut interest rates. The low July jobs report makes a half-point cut “more likely” than the more typical quarter-point move the Fed has used, commented Matt Sharp, co-founder and managing principal of Hamilton Point Investments, in a statement. “A weak August jobs report can certainly help the Fed make its case.”