by Bill McBride on 10/05/2016 03:45:00 PM
Wednesday, October 05, 2016
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 168,000 non-farm payroll jobs in September (with a range of estimates between 155,000 to 200,000, and for the unemployment rate to be unchanged at 4.9%.
The BLS reported 151,000 jobs added in August.
Here is a summary of recent data:
• The ADP employment report showed an increase of 154,000 private sector payroll jobs in September. This was below expectations of 170,000 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 somewhat below expectations.
• The ISM manufacturing employment index increased in September to 49.7%. 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 20,000 in September. The ADP report indicated 6,000 manufacturing jobs lost in September.
The ISM non-manufacturing employment index increased in September to 57.2%. 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 265,000 in September.
Combined, the ISM indexes suggests employment gains of about 245,000. This suggests employment growth well above expectations.
• Initial weekly unemployment claims averaged 256,000 in September, down from 263,000 in August. For the BLS reference week (includes the 12th of the month), initial claims were at 251,000, down from 261,000 during the reference week in August.
The decrease during the reference suggests fewer layoffs in September as compared to August. This suggests a positive employment report.
• The final September University of Michigan consumer sentiment index increased to 91.2 from the August reading of 89.8. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and possibly politics.
• Conclusion: Unfortunately none of the indicators alone is very good at predicting the initial BLS employment report. The ADP report would suggest a report weaker than the consensus, and the ISM reports, unemployment claims, consumer sentiment all suggest stronger job growth.
My guess is the September report will be above the consensus forecast.