Credit Agricole on NFP - FJElite

After a period of strength in the spring, the July jobs report came in much weaker than expected, highlighted by an outright decline in NFP along with notable downward revisions to prior months. In August, we look for some bounce back compared to last month, though we anticipate that the report could be somewhat of a mixed bag overall.

We expect NFP to rebound, projecting an increase of+65k following the decline of-23k in July. This would represent a clear improvement from last month, though it would still be below levels seen in the spring.

■ That said, we do see a couple of factors that could pose downside risks this month including: (1) seasonality, as August frequently surprises to the downside and (2) anecdotal reports of school budget cuts that could weigh on state & local government education, which typically is the main driver of NSA NFP gains on the month.

Despite an expected rebound in NFP, we look for the unemployment rate to edge back up to 4.2% from 4.1%. Here, the recent decline has been largely down to a dip in participation, and we think some payback is possible in August, providing upward pressure on the unemployment rate. Still, this would remain below the 4.5% level reached in November, which we currently see as the peak of the cycle.