If you ask highly-paid forecasters, the US economy probably added 165,000 jobs in August.

That’s the bar to clear for the headline NFP print on September 6, when the size of the first Fed rate cut will effectively be decided. The unemployment rate’s seen slipping to 4.2%.

A consensus read on job creation would mark a pick up from the prior month’s pace. Not that anyone needs a reminder, but the July 2024 US jobs report already lives in infamy: It was one of several catalysts for the fleeting bout of volatility that shook markets at the beginning of last month.

With May’s sizable gain dropping out of the lookback, 165,000 on the headline would actually push the three-month average lower, to 153,000, naively assuming no revisions.

As the figure shows, that’d be the slowest three-month average pace of hiring since January of 2021, the month after the last negative NFP headline.

If you believe — and try not to laugh — that the FOMC’s an eminently rational, level-headed institution that operates above the proverbial fray, insulated from “Mr. Market”‘s mercurial mood swings, you might argue things are going exactly according to plan. The Fed pivoted after four consecutive benign inflation reports offset a trio of concerning releases during Q1 and the pivot came just in time to put a floor under the labor market, with monthly job growth situated in the “just right” zone between 150,000 and 200,000.

Of course, human affairs rarely (which is to say never) go precisely according to plan. Gang aft agley. So, if I were a gamblin’ man, I’d wager it’s too late. It’s not manifesting in net job losses just yet, but the slowdown in hiring is entrenched enough that a negative headline NFP print is coming sooner rather than later. And we all know the jobless rate hasn’t peaked for the cycle.

That said, the “sooner” in “sooner rather than later” doesn’t have to be this coming week. As discussed at some length in the new Weekly, the August jobs report may turn out ok or perhaps better than ok, in which case front-end US rates will promptly reprice to reflect somewhere in the neighborhood of 80bps of cuts for this year (three quarter-point moves plus a little extra cut premium to account for low odds that December’s move is a 50). Currently, the market’s priced for ~100bps.

As you ponder all of this, bear in mind:

1. The BLS’s preliminary annual benchmark revision suggested the pace of hiring was much slower from April of 2023 to March of 2024 than initially reported. (174,000 on average, down from 242,000.)
2. The hires series in the JOLTS report recently slipped below levels observed in and around the last negative NFP headline.
3. In the latest NY Fed survey of labor market expectations, the share of respondents who reported searching for a job was the highest in a decade, and the average expected likelihood of becoming unemployed was 4.4%, likewise the most in over 10 years.

Those are all canaries. They don’t necessarily mean the mine’s flooded with poisonous gas, but when taken together — and with the now-triggered Sahm rule — they do suggest market participants and the Fed are on notice.

Although August payrolls will have the final “say” in the holiday-shortened US week ahead, the ISM releases will be eyed closely as well. Recall that a (very) poor read on the employment gauge in the manufacturing release for July contributed to last month’s growth scare.

Markets participants will be keen for evidence of improvement on that series, even as it’s merely anecdotal and arguably immaterial for the big picture, given that America in 2024 isn’t exactly a nation of machinists and welders.

Also on the US docket: A refreshed JOLTS report (and an update on the hiring series mentioned above), ADP private payrolls and a smattering of lesser releases, including the Fed’s Beige Book.

Again, it’s all (every, single bit of it in the near-term, where the “it” in “it’s” encompasses all macro-market concerns unrelated to China’s never-ending quasi-recession) about the US jobs report. I don’t think that’s overstating the case. It’s not just that the size of the first Fed cut of the cycle depends on it. This week’s BLS readout will also validate or invalidate the “growth scare” narrative which many market observers believe was far more important in explaining last month’s brief risk asset seizure than the much-ballyhooed carry trade unwind.

And don’t forget: America goes to the polls in two months. “[T]he debate regarding whether Powell is late to begin normalizing could soon be complicated by the timing of the election,” BMO’s Ian Lyngen and Vail Hartman wrote. “While further softening in the employment data might argue for a 50bps initial cut, Powell would need to weigh such a move in the context of appearing to favor the Democrats.”