Fed eyes key labour market data as rate cut decision looms

Upcoming readouts on the US labour market, including the monthly payrolls report, will give Federal Reserve policymakers a look at the necessity of further interest-rate reductions beyond an all-but-certain cut in just more than two weeks.

While broad inflation is cooling, though still above the Fed's objective, Chair Jerome Powell has telegraphed a September rate cut and said officials "do not seek or welcome" further cooling in the labour market. That echoes government figures weeks earlier showing lower-than-expected July job growth and the highest jobless rate in nearly three years.

This Friday's August jobs report is forecast to show payrolls in the world's largest economy rose by about 165,000, according to the median estimate in a Bloomberg survey of economists.

While above the modest 114,000 gain in July, average payroll growth over the most recent three months would ease to a little more than 150,000 - the smallest since the start of 2021. The jobless rate probably edged down in August, to 4.2 per cent from 4.3 per cent.

Data on job openings, a gauge of labour demand, will be released two days before the Friday report and are expected to cool to 8.1 million, a three-month low, but just above a more than three-year low.

The job-openings-to-unemployed-workers ratio, closely watched by the Fed, has fallen to 1.2, compared with pre-pandemic levels and suggests a labour market where demand is roughly in balance with supply. It peaked in 2022 at 2 to 1.

The report on job openings also includes the number of layoffs and discharges. Any significant increase could heighten concerns among Fed officials that the labour market is softening.

Other reports on labour next week include weekly jobless claims and ADP Research Institute's snapshot of August payrolls. The Fed also will release its Beige Book of regional economic conditions and the Institute for Supply Management reports purchasing managers indexes for manufacturing and services.