Thursday, October 01, 2015

Preview: Employment Report for September

by Bill McBride on 10/01/2015 05:44:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for September. The consensus, according to Bloomberg, is for an increase of 203,000 non-farm payroll jobs in September (with a range of estimates between 180,000 to 235,000), and for the unemployment rate to be unchanged at 5.1%.

The BLS reported 173,000 jobs added in August.

Goldman Sachs economist David Mericle wrote today:

We forecast nonfarm payroll growth of 215k in September, above consensus expectations of 200k by about 0.3 standard deviations of a typical surprise. Labor market indicators were mixed in September, and we therefore expect a print roughly in line with the 212k monthly average seen so far in 2015. August payrolls were likely distorted downward by seasonal bias last month and may be revised up. We expect the unemployment rate to remain at 5.1%. Finally, average hourly earnings should rise a softer 0.1% in September as a result of calendar effects.
Here is a summary of recent data:

• The ADP employment report showed an increase of 200,000 private sector payroll jobs in September. This was above expectations of 190,000 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 slightly above expectations.

• The ISM manufacturing employment index decreased in September to 50.5%. 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 15,000 in September. The ADP report indicated a 15,000 decrease for manufacturing jobs.

The ISM non-manufacturing employment index for September will be released on Monday.

Initial weekly unemployment claims averaged close to 271,000 in September, down slightly from August. For the BLS reference week (includes the 12th of the month), initial claims were at 264,000; down from 277,000 during the reference week in August.

The decrease during the reference suggests a slightly lower level of layoffs in September.

• The final September University of Michigan consumer sentiment index decreased to 87.2 from the August reading of 91.9. 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 September.  From Intuit: Small Business Employment Remains Stagnant in September
U.S. small business employment remained flat in September, posting a decline of 0.01 percent from the August figure.

“Despite the flat net hiring, the hiring rate, which reflects people hired to replace leaving workers as well as new hires, continued at 5.25 percent per month, accounting for turnover in small business employees. The hiring rate has risen steadily since mid-2009,” said Susan Woodward the economist who works with Intuit to produce the indexes.
• Trim Tabs reported that the U.S. economy added 149,000 jobs in September. 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 this month such as ISM manufacturing, TrimTabs and small business hiring.

I'll take the under on the consensus for September, but I expect an upward revision for August.