Thursday, October 31, 2019

October Employment Preview: Take the Under

by Calculated Risk on 10/31/2019 01:35:00 PM

Special Notes on GM Strike and Decennial Census: The GM strike has ended, but 48,000 workers were on strike during the BLS reference week. There was probably some spillover to suppliers and others - and the strike will probably reduce October employment by close to 75,000 jobs. The strike is over, and these jobs will return in November. No worries.

Over the last two months, the Census Bureau increased the number of temporary workers by 26,000. This phase of the Decennial Census was supposed to end mid-October, and it is possible that some of these workers were let go prior to the BLS reference week. If so, the headline number should be adjusted for these hires, see: How to Report the Monthly Employment Number excluding Temporary Census Hiring

Given these special events, it is possible (but unlikely) that we will see a negative headline employment number for October.

On Friday at 8:30 AM ET, the BLS will release the employment report for October. The consensus is for an increase of 90,000 non-farm payroll jobs in October, and for the unemployment rate to increase to 3.6%.

Last month, the BLS reported 136,000 jobs added in September (including 1,000 temporary Census hires).

Here is a summary of recent data:

• The ADP employment report showed an increase of 125,000 private sector payroll jobs in October. This was below consensus expectations of 139,000 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 below expectations.

• The ISM Manufacturing and non-manufacturing reports have not been released for October.

Initial weekly unemployment claims averaged 215,000 in October, up from 213,000 in September. For the BLS reference week (includes the 12th of the month), initial claims were at 218,000, up from 210,000 during the reference week the previous month.

This suggest a few more layoffs (during the reference week) in October than September..

• The final October University of Michigan consumer sentiment index increased to 95.5 from the September reading of 93.2. 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 October suggesting 41K jobs lost in October.

• Conclusion: Based primarily on the BofA job tracker, and the GM strike, I expect job gains below expectations.