Tonight's US non-farm payrolls report is a major test, with both "good news" and "bad news"!

The US August non-farm payrolls report will be released tonight. Wall Street expects a slight rebound in employment growth from July's negative figure, but market logic has quietly shifted—for investors, a strong report isn't necessarily good news, and a poor report doesn't necessarily mean disaster. The core of the data game lies in the Federal Reserve's next interest rate hike path.

Market consensus expects August non-farm payrolls to increase by 55,000, rebounding from a decline of 23,000 in July, with the unemployment rate expected to remain unchanged at 4.1% and average hourly earnings expected to rise by 0.3% month-on-month. Goldman Sachs, however, takes a more cautious stance, predicting only 40,000 new jobs, slightly below the consensus. According to JPMorgan's market intelligence team, Federal Reserve Chairman Warsh clearly stated at the Jackson Hole symposium that the economy is currently at full employment and inflationary pressures remain high. This means that the non-farm payroll data is operating within the "good news is bad news" logic framework—strong employment will push up bond yields and suppress US stocks .

In terms of market impact, JPMorgan Chase believes that under the current policy environment, next week's CPI data will have a greater impact on the Federal Reserve meeting on September 16 than today's non-farm payroll report. According to JPMorgan Chase, the implied intraday volatility for S&P 500 options expiring on September 4 is approximately 1.1%. According to Bloomberg's chief economist Anna Wong, if August's non-farm payrolls report is negative again, "in the modern history of the Federal Reserve, there is no precedent for the Fed to raise interest rates after two consecutive months of negative non-farm payrolls."

Data Expectations: Mixed signals, conflicting bullish and bearish sentiment.

Leading indicators for the job market in August showed significant divergence, making forecasts more difficult than usual.

ADP reported that private sector employment increased by only 38,000 in August, the slowest pace since January and below the consensus estimate of 47,000, marking the largest shortfall from expectations in recent times.

Revelio's public labor force statistics show that the economy added 36,500 jobs in August, a significant slowdown from 79,200 in July. Initial jobless claims rose to 207,000 during the BLS survey window, up from 189,000 in July. Goldman Sachs' alternative employment indicator averaged 31,000, down from 65,000 in July. Furthermore, a Challenger report showed that employers announced 52,900 job cuts in August, a significant increase from 33,400 in July.

However, the overall layoffs remain restrained – according to Challenger statistics, the cumulative number of layoffs in the first eight months of 2026 was approximately 530,000, the lowest for the same period since 2022 ; while the hiring plan is the highest since 2023.

The monthly average of initial jobless claims was $204,000, lower than $210,000 in July, and the JOLTS layoff rate also decreased by 0.1 percentage points month-over-month to 1.0%. In addition, employment in the leisure and hospitality industry fell by a cumulative 83,000 in the previous two months, and employment in local government education fell by 61,000, both of which have room for normalization and rebound.

Job vacancy data (combined from JOLTS, Indeed, and LinkUp) remained largely flat in July, with no significant trend changes observed recently.

Business survey signals were also mixed: the ISM manufacturing employment index fell slightly to 51.2, still in expansion but at a slower pace; the ISM services employment index rose slightly to 47.8, remaining in contraction territory for the second consecutive month; while the employment sub-indexes of the S&P Global Manufacturing and Services PMIs both strengthened, with the latter recording its fastest employment growth in nearly 18 months.

Temporary protected status expiring: Potential downside tail risk

Analysts specifically pointed out a policy factor that could mechanically suppress employment data: the temporary protected status of approximately 300,000 immigrants (mainly of Haitian descent) expired at the end of July, terminating their work permits in the United States.

Barclays estimates that approximately 200,000 of these individuals were still counted in the July nonfarm payroll survey, while an estimated 25,000 will disappear from the August statistics as employers stop including them in payroll records. This will continue to be a drag on employment for the following months as the remaining individuals complete their eligibility verification. Some applied for asylum before the deadline, and some were approved before their status expired, thus retaining their work eligibility; others may still appear temporarily in their employers' payroll records because employers have not yet completed their work eligibility verification.

According to Bloomberg's chief economist Anna Wong, considering the above factors, there is a fairly high probability that non-farm payrolls will show negative growth for the second consecutive month in August.

Baseline year revision: Employment data was already underestimated.

In the context of this data release, it is also necessary to consider the annual baseline revision forecast results released by the U.S. Bureau of Labor Statistics (BLS) in August.

The revision shows that, as of March 2026, seasonally adjusted employment is 79,000 lower than the previous estimate, a decrease of approximately 0.1%. This is significantly smaller than last year's revision, which saw a substantial increase of 911,000 for the base period of March 2025.

A closer look at the structure reveals that private sector employment was revised downward by a larger amount, reaching 178,000, meaning the actual monthly increase was 24,000, rather than the previously reported 38,000. By sector, retail saw the largest downward revision (-154,600), while transportation and warehousing saw the largest upward revision (+135,100). Government employment was revised upward by 99,000 despite federal employee cuts. The final revised data will be officially included in the February 2027 employment report.

Federal Reserve Policy Path: After Non-Farm Payrolls, CPI is the Real Key

At the Federal Reserve policy level, analysts are largely in agreement: non-farm payroll data close to expectations and the unemployment rate remaining stable are consistent with the assessment that "the job market is cooling but not deteriorating sharply," which will allow policymakers to continue focusing on inflation-related policy objectives.

The scenario that would truly change the policy logic is a significant negative growth in non-farm payrolls. Anna Wong explicitly pointed out that if non-farm payrolls are negative again in August, "there is no precedent in the modern history of the Federal Reserve for proceeding with interest rate hikes after two consecutive months of negative growth," which would immediately freeze any market expectations for interest rate hikes.

From a market reaction perspective, JPMorgan Chase believes that with only the non-farm payrolls and CPI data remaining before the Fed meeting on September 16, the latter carries more weight. A strong non-farm payrolls report will push bond yields upward, suppressing the stock market through a self-reinforcing logic of "more jobs → more consumption → further corporate expansion." Given that Warsh had already pointed out the potential risks of loose monetary conditions at Jackson Hole, this transmission mechanism is particularly alarming.

JPMorgan Chase's "Goldilocks range" is 30,000 to 70,000 new jobs; within this range, the market is more likely to remain relatively stable.

If the number of cases exceeds 100,000, US stocks will face significant pressure.

According to JPMorgan Chase, the following are the market reaction paths for different data ranges:

If the number of cases exceeds 100,000, US stocks will face significant pressure, the 10-year Treasury yield will rise, and the market will more fully price in a September rate hike. If the number falls between 70,000 and 100,000, the stock market will experience slight pressure, and yields will rise moderately. The range of 30,000 to 70,000 is known as the "Goldilocks range," and the market reaction will be relatively neutral. If the number falls below 30,000 or becomes negative, short-term interest rates will decline rapidly, but a negative scenario could trigger "stagflation concerns," and the market's judgment on the Fed's policy path will become highly complex.

Goldman Sachs expects average hourly earnings to rise 0.4% quarter-on-quarter, higher than the consensus estimate of 0.3%, believing that a positive calendar effect will support stronger wage data. Goldman Sachs' wage tracking metric shows that hourly earnings grew 2.8% quarter-on-quarter and 3.6% year-on-year in the second quarter, still below its estimated 4% growth threshold to align with the 2% inflation target.

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