06:53 AM EDT, 10/03/2024 (MT Newswires) -- US employment growth is expected to improve in September versus the previous month but a weaker-than-expected nonfarm payrolls report could persuade the Federal Reserve to lower interest rates by another 50 basis points in November, according to Oxford Economics.

The US is anticipated to have added 165,000 jobs last month, up from 142,000 in August, while the market is expecting job growth of 150,000, the economic advisory firm said in a note emailed Wednesday. The Bureau of Labor Statistics is scheduled to release its nonfarm payrolls report for September on Friday.

"This month's September jobs report is a crucial one for the Federal Reserve," Nancy Vanden Houten, lead US economist at Oxford Economics, said in the note. "If results come in significantly weaker than expected, that could add weight to arguments for another (50-basis-points) rate at the Fed's November meeting."

The firm forecasts the unemployment rate to edge 0.1 percentage points higher to 4.3% in September potentially triggering the Sahm rule, an economic indicator used to predict recessions based on changes in the unemployment rate. However, the firm believes the rule is sending a "misleading recessionary" signal as labor supply growth has been responsible for the rise in the unemployment rate, rather than an increase in permanent layoffs.

The Boeing (BA) workers strike started in September isn't likely to impact last month's payroll data, but could reduce job growth in October if it persists for another two weeks, according to Vanden Houten. The strike from dockworkers at ports on the East and Gulf coasts, which began this week, could also weigh on job gains if it lasts through the middle of this month, the firm said.

"With a growing focus on potential weakness in the labor market, a weaker-than-expected read in Friday's report will no doubt boost expectations for a more sizable Fed response come November," Stifel Economics said in a separate client note Wednesday. "Equally, however, further indications of an ongoing solid or steady labor market coupled with still elevated prices will serve to underscore the need for a more tempered and patient approach to rate cuts going forward."

Automatic Data Processing (ADP) on Wednesday reported that employment growth in the private sector accelerated in September while wage growth cooled.