Insights 
VT 
Goldman Sachs anticipates US jobs data to show weakening signs without collapsing. The firm expects non-farm payrolls to rise by +60K, with potential risks being lower due to August’s seasonal negative bias.
The unemployment rate is predicted to increase to 4.3% as the labour market loses momentum. Average hourly earnings are expected to grow by +0.3% month-on-month, driven by favourable calendar effects.
Data May Support Fed Rate Cut
Overall, the data could support the Federal Reserve in cutting rates in September. However, the timing of rate cuts might still be debated, depending on other developments.
The US jobs data this week is expected to show continued weakening, though not a collapse. We are forecasting non-farm payrolls to come in at a soft +60,000, with a notable risk for an even lower number due to negative seasonal factors often seen in initial August reports. This follows a clear cooling trend observed since the second quarter of 2025, where monthly job gains have struggled to stay above 100,000.
We also see the unemployment rate climbing to 4.3%, a level not seen since late 2023, signaling a further loss of momentum in the labor market. This uptick would represent a significant shift from the sub-4% rates that characterized much of 2024. However, wage growth should remain contained, with average hourly earnings likely rising a modest 0.3% month-over-month.
Potential Market Reactions
This combination of slowing payrolls and rising unemployment should support the case for a Federal Reserve rate cut at its meeting later this month. With Core PCE inflation still hovering near 2.7% according to the latest data from July, the Fed is facing increasing pressure to pivot towards supporting the economy. This data point will be critical in a market that has priced in a roughly 65% chance of a cut, as seen in Fed funds futures.
For derivative traders, this environment suggests positioning for an increase in volatility ahead of the jobs report and the September FOMC meeting. The Cboe Volatility Index (VIX), which has been trading in a relatively low range around 15, could see a significant spike if payrolls miss to the downside. Buying short-dated VIX call options or straddles on the SPY ETF could be a prudent way to trade this expected turbulence.
In the interest rate space, options on SOFR futures point to lingering uncertainty about the exact timing of the Fed’s first move. Given our view, traders could look at bull steepener trades using Treasury futures, betting that short-term rates will fall faster than long-term ones. This strategy would perform well if the Fed signals a more aggressive cutting cycle in response to the weak labor data.
Given the downside risks to the payroll figure, holding some downside protection is warranted. We believe purchasing out-of-the-money put options on the S&P 500 or Nasdaq 100 indices provides a cost-effective hedge. A much weaker-than-expected jobs report could trigger a risk-off move, even if it solidifies the case for a rate cut.
