U.S. August Nonfarm Payroll Preview: Risks Focus on Downward Revision of July Data

TradingKey -  On 5 September 2025, the U.S. Department of Labour will release the August Non-Farm Payrolls report. The market widely expects August to see an addition of 75,000 non-farm jobs, roughly in line with July’s 73,000. Employment in government and manufacturing sectors is anticipated to remain weak, while the private sector will continue to be the primary driver of job growth. Given the offsetting trends across sectors, a significant increase or decrease in August’s non-farm payrolls data is unlikely.

We believe the primary risk to U.S. financial markets from this non-farm payrolls report lies not in the August data itself but in whether July’s figures face significant downward revisions. If July’s data is substantially revised lower, we expect U.S. stocks to experience a sharp initial decline followed by a recovery on the same day. Specifically, a significant downward revision would signal labour market weakness, prompting investors to engage in an “economic slowdown trade.” This would likely lead to pre-market weakness in U.S. stock index futures and an initial drop in equities after the market opens. Subsequently, the “economic slowdown trade” may shift to a “rate-cut trade,” ultimately driving a rebound in U.S. stocks from their intraday lows.

Looking ahead, from a medium-term perspective, we remain optimistic about U.S. equities, as the Federal Reserve’s interest rate cuts release liquidity and tax reductions inject momentum into the economy.

 Source: Mitrade 

Main Body

On 5 September 2025, the U.S. Department of Labour will release the August Non-Farm Payrolls report. The market widely anticipates an addition of 75,000 non-farm jobs in August, closely aligned with July’s 73,000. Given significant downward revisions to May and June non-farm payrolls and the broader weakening trend in the U.S. labour market, the unemployment rate is expected to rise from 4.2% in July to 4.3% in August (Figure 1).

Figure 1: Market Consensus Forecasts

Source: Refinitiv, TradingKey

Since the beginning of this year, U.S. non-farm payrolls have shown a pattern of initial growth followed by a decline (Figure 2). The expectation that August’s data will be roughly in line with July’s is based on a mixed outlook for the labour market in August. On one hand, government sector employment fell by 10,000 in July, and manufacturing employment declined for three consecutive months. On the other hand, the private sector remains the primary driver of job growth, with 83,000 jobs added in July. We believe this offsetting dynamic across sectors will persist into August, making significant increases or decreases in the August non-farm payrolls data unlikely.

Figure 2: U.S. Non-Farm Payroll (000)

Source: Refinitiv, TradingKey

We believe the primary risk to U.S. financial markets from this non-farm payrolls report stems not from the August data itself but from whether July’s figures face significant downward revisions. Last month, the non-farm payrolls data for May and June were sharply revised downward from 144,000 and 147,000 to 19,000 and 14,000, respectively (Figure 3). These revisions directly led to the dismissal of the former U.S. Bureau of Labour Statistics Commissioner just hours after the data release.

If, on 5 September 2025, the August non-farm payrolls data release coincides with significant downward revisions to July’s figures, we expect U.S. stocks to exhibit a sharp initial decline followed by a recovery on the same day. Specifically, substantial revisions downward would signal labour market weakness, prompting investors to engage in an “economic slowdown trade.” This would likely lead to weakness in pre-market U.S. stock index futures and an initial drop in equities after the market opens. Subsequently, the “economic slowdown trade” may shift to a “rate-cut trade,” ultimately driving a rebound in U.S. stocks from their intraday lows.

Figure 3: U.S. Non-Farm Payroll May and June Revision (000)

Source: Refinitiv, TradingKey

Looking ahead, from a medium-term perspective, the weakening U.S. labour market and slowing economic growth are unlikely to reverse, exerting downward pressure on inflation from the demand side. We expect this suppression to offset inflationary pressures from tariffs, making significant re-inflation unlikely. Against this backdrop, we anticipate the Federal Reserve will cut interest rates three times this year (Figure 4). As Fed rate cuts release liquidity and tax reductions inject economic momentum, we remain optimistic about U.S. equities in the medium term.

Figure 4: Fed Policy Rate (%)

Source: Refinitiv, TradingKey