Thursday, September 05, 2019

August Employment Preview

by Calculated Risk on 9/05/2019 12:27:00 PM

Special Note on Decennial Census: Temporary Decennial Census hiring will probably impact the August employment report with the Census hiring as many as 40,000 temporary workers. The headline number should be adjusted for these hires, see: How to Report the Monthly Employment Number excluding Temporary Census Hiring

On Friday at 8:30 AM ET, the BLS will release the employment report for July. The consensus is for an increase of 158,000 non-farm payroll jobs in August, and for the unemployment rate to be unchanged at 3.7%.

Last month, the BLS reported 164,000 jobs added in July.

Here is a summary of recent data:

• The ADP employment report showed an increase of 195,000 private sector payroll jobs in August. This was above consensus expectations of 150,000 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 August to 47.4%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll decreased 35,000 in August. The ADP report indicated manufacturing jobs increased 8,000 in August.

The ISM non-manufacturing employment index decreased in August to 53.1%. 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 increased 155,000 in August.

Combined, the ISM surveys suggest employment gains at 120,000 suggesting gains below consensus expectations.

Initial weekly unemployment claims averaged 216,000 in August, up from 212,000 in July. For the BLS reference week (includes the 12th of the month), initial claims were at 211,000, down from 216,000 during the reference week the previous month.

This suggest employment growth close to expectations.

• The final August University of Michigan consumer sentiment index decreased sharply to 89.8 from the July reading of 98.4. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• The BofA job tracker was weak in August suggesting 102K jobs added in August.

• Conclusion: The ISM employment indexes were weak in August, especially the manufacturing index. However the ADP employment suggests a report above the consensus. Employment reports for August are frequently revised up, suggesting the initial report will be lower than expectations. Also the BofA jobs tracker was especially weak in August, and consumer sentiment decreased significantly.

My guess is the jobs number (ex-Census hiring) will be below expectations.