Thursday, September 03, 2015

Preview: Employment Report for August

by Bill McBride on 9/03/2015 12:59:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for August. The consensus, according to Bloomberg, is for an increase of 223,000 non-farm payroll jobs in August (with a range of estimates between 173,000 to 257,000), and for the unemployment rate to decline to 5.2%.

The BLS reported 215,000 jobs added in July.

Here is a summary of recent data:

• The ADP employment report showed an increase of 190,000 private sector payroll jobs in August. This was below expectations of 210,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth below expectations.

• The ISM manufacturing employment index decreased in August to 51.2%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs decreased about 13,000 in August. The ADP report indicated a 7,000 increase for manufacturing jobs.

The ISM non-manufacturing employment index decreased in August to 56.0%. A historical correlation  between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 234,000 in August.

Combined, the ISM indexes suggests employment gains of 221,000.  This suggests employment at expectations.

Initial weekly unemployment claims averaged close to 275,000 in August, about the same as in July. For the BLS reference week (includes the 12th of the month), initial claims were at 277,000; up from 255,000 during the reference week in July.

The increase during the reference suggests a slightly higher level of layoffs in August.

• The final July University of Michigan consumer sentiment index decreased to 91.9 from the July reading of 93.1. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like gasoline prices.

• On small business hiring: The small business index from Intuit showed a small decrease in small business employment in August.  From Intuit: Small Business: Hours Worked, Compensation Rose in August; Jobs Declined

Small business employment fell by 5,000 jobs in August, an annual rate of 0.30 percent. However, Susan Woodward, the economist who works with Intuit to produce the indexes, said this change is very small.

“July’s figure was revised up by 2,000 jobs. The level of small business employment is 20.7 million jobs, so the August decline doesn’t indicate a clear or major sign of softness in the labor force,” Woodward said.
• Trim Tabs reported that the U.S. economy added 241,000 jobs in August. Note: "TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 142 million U.S. workers subject to withholding."

• Conclusion: Unfortunately none of the indicators above is very good at predicting the initial BLS employment report.

There were several weaker indicators such the ADP report, ISM manufacturing, and small business hiring.

Historically the initial report for August tends to be revised up, so I'll take the under on the consensus this month.