Thursday, November 01, 2018

October Employment Preview

by Bill McBride on 11/01/2018 12:53:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for October. The consensus is for an increase of 190,000 non-farm payroll jobs in October (with a range of estimates between 150,000 to 231,000), and for the unemployment rate to be unchanged at 3.7%.

The BLS reported 134,000 jobs added in September.

Here is a summary of recent data:

• The ADP employment report showed an increase of 227,000 private sector payroll jobs in October. This was well above consensus expectations of 180,000 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.

• The ISM manufacturing employment index decreased in October to 56.8%. 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 17,000 in October. The ADP report indicated manufacturing jobs increased 17,000 in October.

The ISM non-manufacturing report has not been released yet.

Initial weekly unemployment claims averaged 214,000 in October, up from 207,000 in September. For the BLS reference week (includes the 12th of the month), initial claims were at 210,000, up from 202,000 during the reference week the previous month.

The increase during the reference week suggests a slightly weaker employment report in October.

• The final October University of Michigan consumer sentiment index decreased to 98.6 from the September reading of 100.1. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Merrill Lynch has introduced a new payrolls tracker based on private internal BAC data. The tracker suggests private payrolls increased by 200,000 in October, and this suggests employment growth slightly above expectations.

• Looking back at the three previous years:

In October 2017, the consensus was for 325,000 jobs, and the BLS reported 261,000 jobs added (bounce back from Hurricane).

In October 2016, the consensus was for 178,000 jobs, and the BLS reported 161,000 jobs added.

In October 2015, the consensus was for 190,000 jobs, and the BLS reported 271,000 jobs added.

There is no clear pattern comparing consensus to actual for October.

• The hurricanes make the forecast even less certain this month.   

• Conclusion:  These reports suggest a solid employment report in October.    It seems likely there will be some bounce back following Hurricane Florence, but Hurricane Michael might negatively impact the report.   My guess is the report will be close to the consensus.