Economists expect August job rebound to let the Fed zero in on inflation

After the US economy shed 23,000 jobs in July, a surprise that rattled markets, economists are forecasting a modest rebound in August with roughly 55,000 nonfarm payroll additions. The turnaround, if it materializes, would give the Federal Reserve something it badly wants: permission to stop worrying about employment and get back to its real obsession, bringing inflation to heel. The unemployment rate is expected to hold steady at around 4.1%, a level Fed Chair Kevin Warsh recently described as consistent with full employment during his remarks at Jackson Hole. The inflation math still doesn’t add up Headline PCE inflation, the Fed’s preferred gauge, sits at approximately 3.7% year-over-year. Core PCE, which strips out food and energy, is running close to 3.3%. Both figures are well north of the Fed’s 2% target. The federal funds rate has been parked in the 3.50% to 3.75% range throughout 2026. The problem is that inflation hasn’t gotten the memo. Warsh’s Jackson Hole signal Fed Chair Warsh used his Jackson Hole appearance to lay the rhetorical groundwork for exactly this pivot. By characterizing the labor market as reflective of full employment, he essentially told markets that th...