Thursday, August 31, 2017

August Employment Preview

by Bill McBride on 8/31/2017 11:53:00 AM

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 180,000 non-farm payroll jobs in August (with a range of estimates between 140,000 to 200,000), and for the unemployment rate to be unchanged at 4.3%.

The BLS reported 209,000 jobs added in July.

Here is a summary of recent data:

• The ADP employment report showed an increase of 237,000 private sector payroll jobs in August. This was well above consensus expectations of 182,000 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 above expectations. However, the ADP number has frequently been above the BLS number for August.

• The ISM manufacturing and non-manufacturing indexes have not been released yet.

Initial weekly unemployment claims averaged 237,000 in August,  down from 242,000 in July. For the BLS reference week (includes the 12th of the month), initial claims were at 232,000, down from 234,000 during the reference week in July.

The decrease during the reference week suggests slightly fewer layoffs during the reference week in August than in July. This suggests a similar employment report in August as in July.

• The final August University of Michigan consumer sentiment index increased to 97.6 from the July reading of 93.4. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion: Unfortunately the ISM reports will be released after the employment report this month, and those reports are helpful. Also August tends to be below the ADP report (and frequently below consensus). My sense (mostly based on history) is that job gains will be below consensus in August.