Thursday, October 02, 2014

Preview: Employment Report for September

by Calculated Risk on 10/02/2014 01:45:00 PM

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 215,000 non-farm payroll jobs in September (range of estimates between 185,000 and 289,000), and for the unemployment rate to be unchanged at 6.1%.

The BLS reported 142,000 jobs added in August.

Here is a summary of recent data:

• The ADP employment report showed an increase of 213,000 private sector payroll jobs in September. This was above expectations of 200,000 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 54.6%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs increased about 6,000 in September. The ADP report indicated a 35,000 increase for manufacturing jobs in September.

The ISM non-manufacturing employment index for September will be released on Friday after the employment report.

Initial weekly unemployment claims averaged close to 295,000 in September, down from 300,000 in August. For the BLS reference week (includes the 12th of the month), initial claims were at 281,000; this was down from 299,000 during the reference week in August.

The lower reference week reading suggests slightly fewer layoffs in September than in August.

• The final September Reuters / University of Michigan consumer sentiment index increased to 84.6 from the August reading of 82.5. This is frequently coincident with changes in the labor market, but there are other factors too - like lower gasoline prices.

• On small business hiring: The small business index from Intuit showed a 10,000 increase in small business employment in September.

And from NFIB: NFIB Jobs Statement: Small Businesses Report Stronger Hiring, But Expectations Remain Muted "NFIB owners increased employment by an average of 0.24 workers per firm in September (seasonally adjusted), the twelfth positive month in a row and the largest gain this year."

• Special circumstance: In August, a strike at Market Basket in New England negatively impacted the employment report. From BLS Commissioner Erica Groshen:

Within retail, employment declined in food and beverage stores (-17,000); this industry was impacted by employment disruptions at a grocery store chain in New England.
The disruption ended quickly, and food and beverage employment should bounce back in September.

• Conclusion: Below is a table showing several employment indicators and the initial BLS report (the first column is the revised employment added). A few key points:

1) Most of the revisions this year have been up (average about 15,000). I expect employment for August will be revised up too (over the last 4 years, August has eventually been revised up an average of 55,000 jobs).

2) Unfortunately none of the indicators below is very good at predicting the initial BLS employment report.  

3) September tends to be revised up sharply (like August, up an average of 55,000 jobs over the last 4 years).  This suggests the BLS might underestimate employment in September again.  However some of the recent initial low estimates for September  might have been because the seasonal factors were skewed by the deep recession (this effect fades over time).

4) In general it looks like this should be another 200+ month (based on ADP, unemployment claims, and small business hiring).

5) As mentioned above, there was a labor disruption in August that was resolved quickly.  So this should boost the September employment report.

So I'll take the over again (above 215,000).  But I sure was wrong last month!

Employment Indicators (000s)
  BLS
Revised
BLS
Initial
ADP
Initial
ISMWeekly
Claims
Reference
Week1
Intuit
Small
Business
Jan14411317523632910
Feb222175139-63340
Mar2031921911533230
Apr304288220NA32025
May22921717913032735
Jun267288281NA31420
Jul212209218NA30315
Aug  1422042852990
Sep  Friday213NA28110
1Lower is better for Unemployment Claims