NFP Preview Has the US Jobs Market Downshifted to a Slower New Normal

NFP Key Points

• NFP report expectations: +75K jobs, +0.3% m/m earnings, unemployment at 4.3%.
• Leading indicators point to a potentially above-expected reading in this month’s NFP report, with headline job growth potentially coming in somewhere in the 80-130K range
• The US Dollar Index (DXY) has spent the last five weeks consolidating in the 97.60-98.90 range, setting the stage for a potential breakout if we get a clear signal on the health of the US jobs market.

When is the August NFP Report?

The August NFP report will be released on Friday, September 5, at 8:30 ET.

NFP Report Expectations

Traders and economists expect the NFP report to show that the US created 75K net new jobs, with average hourly earnings rising 0.3% m/m (3.7% y/y) and the U3 unemployment rate ticking up to 4.3%.

NFP Overview

Last month, everything changed for the US labor market.

That may be a bit dramatic, but there’s no denying that the weak headline jobs reading (73K), combined with more than a quarter-million jobs from the previous two months getting revised away, led economists, policymakers, and traders to negatively revise their outlooks for the US economy.

For this month’s jobs report, expectations are relatively subdued, with many expecting the US jobs market to downshift to a “new normal” of <100K jobs per month (which St. Louis Fed President Alberto Musalem believes could still be enough to maintain a constant unemployment rate given immigration trends).

MUSALEM - JOB MARKET BREAK-EVEN LEVEL BETWEEN 30,000 AND 80,000 JOBS PER MONTH

Falling net immigration has had a big impact here - this used to be 100-150K

— Matt Weller CFA, CMT (@MWellerFX) September 3, 2025

Outside of the market’s headline expectation for +75K net new jobs, traders are also expecting average hourly earnings to rise +0.3% (3.7% y/y) and the U# unemployment rate to tick up again to 4.3%:

Source: StoneX

With last month’s NFP report raising red flags about the labor market (and inflation yet to spike on the back on the back of century-highs in tariffs), traders fully expect the Federal Reserve to cut interest rates by 25bps at its meeting later this month, and it would take a big surprise in this month’s jobs report to change those expectations meaningfully. Instead, traders will revise their expectations for follow-up interest rate cuts for the Fed in October (currently seen as a coinflip) and potentially again in December (~40% discounted as of writing). That said, we will have (at least) another jobs report before those decisions, so the reaction to this month’s jobs report may not be as extreme as we saw last month.

NFP Forecast

As regular readers know, we focus on four historically reliable leading indicators to help handicap each month’s NFP report:

• The ISM Services Employment subindex held steady at 46.5 from last month’s 46.4 print.
• The ISM Manufacturing Employment subindex was essentially unchanged at 43.8 vs. last month’s 43.4 reading.
• The ADP Employment report rose just 54K jobs, down from last month’s 106K print.
• The 4-week moving average of initial unemployment claims rose to 231K from last month’s 221K reading.

Weighing the data and our internal models, the leading indicators point to a potentially above-expected reading in this month’s NFP report, with headline job growth potentially coming in somewhere in the 80-130K range, albeit with a big band of uncertainty given the shifting labor trends.

Regardless, the month-to-month fluctuations in this report are notoriously difficult to predict, so we wouldn’t put too much stock into any forecasts (including ours). As always, the other aspects of the release, including the closely-watched average hourly earnings figure and unemployment rate will also impact how markets react to the release.

Potential NFP Market Reaction

	Wages < 0.2% m/m	Wages 0.2-0.4% m/m	Wages > 0.4% m/m
< 25K jobs	Bearish USD	Bearish USD	Slightly Bearish USD
25-125K jobs	Slightly Bearish USD	Neutral USD	Neutral USD
> 125K jobs	Neutral USD	Slightly Bullish USD	Bullish USD

After last month’s big post-NFP washout, the US Dollar Index (DXY) has spent the last month consolidating around the 98.00 handle, leaving a relatively neutral near-term bias.

US Dollar Technical Analysis – DXY Daily Chart

Source: TradingView, StoneX

As the chart above shows, the US Dollar Index (DXY) has spent the last five weeks consolidating in the 97.60-98.90 range after last month’s NFP report prompted traders to reevaluate their expectations for Fed easing over the rest of the year.

As experienced traders know, volatility tends to be cyclical, meaning that after periods of lower volatility (such as we’ve seen over the last month+), markets can quickly enter a higher volatility regime if a clear fundamental catalyst or technical breakout emerges.

Many readers may want to wait for a clear breakout either higher or lower before entering any medium- or longer-term trends, but for those who have a strong read on the jobs report, it may make sense to anticipate the direction of the breakout in advance. Given the longer-term downtrend in the greenback, those odds may be tilted to the downside unless we see a triple-digit print from NFP this month.

In the event of a downside breakout, the 3.5-year low near 97.15 would be a logical level for bears to watch, whereas a strong jobs report that puts just one 2025 Fed rate cut on the table could lead to a bullish breakout and continuation toward the summer high near 100.25.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX