Thursday, August 03, 2017

July Employment Preview

by Bill McBride on 8/03/2017 01:00:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for July. The consensus, according to Bloomberg, is for an increase of 178,000 non-farm payroll jobs in July (with a range of estimates between 144,000 to 220,000), and for the unemployment rate to decline to 4.3%.

The BLS reported 222,000 jobs added in June.

Here is a summary of recent data:

• The ADP employment report showed an increase of 178,000 private sector payroll jobs in July. This was close to consensus expectations of 175,000 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 close to expectations.

• The ISM manufacturing employment index decreased in July to 55.2%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 10,000 in July. The ADP report indicated manufacturing jobs decreased 4,000 in July.

The ISM non-manufacturing employment index decreased in July to 53.6%. 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 175,000 in July.

Combined, the ISM indexes suggests employment gains of about 185,000.  This suggests employment growth close to expectations.

Initial weekly unemployment claims averaged 242,000 in July, mostly unchanged from 243,000 in June. For the BLS reference week (includes the 12th of the month), initial claims were at 234,000, down from 242,000 during the reference week in June.

The decrease during the reference week suggests slightly fewer layoffs during the reference week in July than in June. This suggests a somewhat stronger employment report in July than in June.

• The final July University of Michigan consumer sentiment index decreased to 93.4 from the June reading of 95.1. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion: None of the indicators alone is very good at predicting the initial BLS employment report.  Overall these indicators suggest job growth close to the consensus.