by Bill McBride on 9/01/2011 01:54:00 PM
Thursday, September 01, 2011
Tomorrow the BLS will release the August Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 67,000 payroll jobs in August, and for the unemployment rate to hold steady at 9.1%.
Once again estimates all over the place, including more whispers of a negative headline number. This isn't surprising since the economic data for August was very weak - especially during the first couple weeks of the month as the shock of a possible U.S. government default rattled consumer and business confidence.
The BLS survey reference week includes the 12th of the month, and the 12th fell on a Friday in August - at the end of the 2nd full week and just after the economic freeze due to the D.C. debate. So even with slightly less worrisome economic reports towards the end of the month, it is possible that the headline number could be below consensus or even negative.
An added wrinkle was the labor dispute at Verizon. I've seen several estimates, but the Verizon dispute (since settled) probably reduced employment by 45,000 in August (these will be added back in September).
So these two factors, 1) a reference period right after a significant shock, and 2) the Verizon labor dispute, suggest a weak employment report.
Here is a summary of recent data:
• The ADP employment report showed an increase of 91,000 private sector payroll jobs in August. Of course ADP hasn't been very useful in predicting the BLS report. Also note that government payrolls have been shrinking by about 30,000 each month. The ADP does use the same reference week as the BLS, and this would suggest around 60,000 nonfarm payroll jobs added.
• Initial weekly unemployment claims averaged about 410,000 per week in August, down slightly from the 412,000 average in July.
• The ISM manufacturing employment index decreased to 51.8%, down from 53.5% in July. Based on a historical correlation between the ISM index and the BLS employment report for manufacturing, this reading suggests a decline of about 10,000 private payroll jobs for manufacturing in August. Note: The ISM non-manufacturing index for August will be released next Tuesday.
• The final July Reuters / University of Michigan consumer sentiment index decreased to 55.7 from 63.7 in July. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This was probably impacted by the debt ceiling debate, but in general this would suggest a weak labor market.
• And on the unemployment rate from Gallup: Gallup Finds U.S. Unemployment Up in August
Unemployment, as measured by Gallup without seasonal adjustment, is at 9.1% at the end of August -- up from 8.8% at the end of July.NOTE: The Gallup poll results are Not Seasonally Adjusted (NSA), so use with caution. Usually the NSA unemployment rate declines in August, so this would suggest an increase in the unemployment rate.
These data further confirm Gallup's mid-month prediction that the August unemployment rate that the government will report Friday will be higher than the 9.1% it reported in July -- barring another sizable decline in the U.S. workforce or an unusual seasonal adjustment.
Because of the reference period following so soon after an economic shock, and also because of the Verizon labor dispute, I'll take the "under" on the number of jobs added (less than 67,000). I'll also take the over on the unemployment rate (I expect higher than 9.1%).