US payrolls likely rebounded in August, but Haitian TPS expiry may cap gains

Washington: The US labor market likely regained some footing in August, with nonfarm payrolls forecast to have risen by 56,000 jobs after a 23,000 decline in July. The anticipated rebound, however, may be tempered by job losses tied to the termination of Temporary Protected Status (TPS) for Haitian immigrants, according to a survey of economists.

The unemployment rate is expected to have held steady at 4.1% last month. The Labor Department's employment report, due Friday, is likely to show a labor market still in a "slow hire, slow fire" phase, economists said.

Growth momentum has cooled since a strong spring, weighed down by the oil price shock and supply chain strains from the US-led war with Iran, as well as the impact of sweeping import tariffs imposed in 2025. "Businesses felt some of the problems from 2025 were behind, then all of a sudden we get another black swan event that introduces a new set of uncertainties," said Brian Bethune, an economics professor at Boston College.

A rebound in local government education employment, which fell by 49,600 in July, is expected to underpin August payrolls. The leisure and hospitality sector, which lost jobs for two straight months, is also seen recovering.

However, the expiry of TPS for hundreds of thousands of Haitian immigrants could offset those gains. "We are assuming a 15,000 drag on payrolls from the revocation of Temporary Protected Status for unauthorized Haitian immigrants," said Michael Gapen, chief economist at Morgan Stanley. "It could be much larger."

The drag, which some economists believe may be temporary, would likely show up in labor-intensive services such as healthcare. The Trump administration's crackdown on immigration, through deportations and TPS revocations, has shrunk the labor pool, lowering the so-called break-even rate of job creation needed to keep up with population growth to between zero and 50,000 jobs per month.

Reduced labor supply, also due to retirements, is keeping the unemployment rate lower, though some economists expect it to rise to 4.2%. "Participation has fallen a full percentage point since the start of the year, a decline that appears outsized relative to broader labor market conditions," said Gregory Daco, chief economist at EY-Parthenon.

Barring a shock, the August employment report is unlikely to alter the Federal Reserve's interest rate decision at its September 15-16 meeting. Annual wage growth is estimated to have slowed to 3.0% from 3.2% in July, suggesting the labor market is not a source of inflation. Fed Governor Christopher Waller said he was inclined to argue for keeping rates steady this month if upcoming data confirmed cooling inflation.

Financial markets saw a 50% chance of a rate hike this month, down from 63.2% on Wednesday. Rising Treasury yields have pushed the 30-year fixed mortgage rate to a more than one-year high of 6.71%, potentially undermining the housing market.