​​Are we in for another dire payrolls report?​

​​What are the forecasts for this month’s payrolls report?

​The August non-farm payrolls (NFP) report is expected to show that 165,000 jobs were created in the US during the month, an improvement over the previous 114,000. Meanwhile, the unemployment rate is expected to fall back to 4.2%, having hit a near three-year high of 4.3% in July.

​What to watch for in the report

​After last month’s shock, which helped to tip markets into a substantial (if brief) pullback on fears of a rising likelihood of a US recession, this month’s report could be a ‘make or break’ moment for the rebound in risk since the August lows.

​Job growth is expected to come from the private education, healthcare and leisure sectors. Softer months for leisure in June and July are likely to give way to a rise in hiring.

​Potential market impact

​Stocks rallied hard from their lows if early August, as fears about a recession gave way to hopes that the Federal Reserve (Fed) would move quickly to cut interest rates. Fed chairman Jerome Powell duly delivered at the Jackson Hole meeting, at which he essentially laid the groundwork for a rate cut at the Fed’s September meeting.

​For those hoping for a continuation of the rally, arguably the best outcome at this week’s payroll report would be a figure in line with forecasts. A much stronger reading, coupled with a big upward revision to last month’s numbers, would allay concerns that the US economy was weakening, but would also reduce the likelihood of a Fed rate cut, which may put further pressure on stocks.

​A much weaker number could also spell trouble for stocks. In such a case, US recession worries would return, as would concerns that the Fed had missed the chance to support the economy with steady rate cuts. The Fed might then have to react more dramatically to the weakening economy, cutting rates in a (likely unsuccessful) bid to stave off a recession.