by Calculated Risk on 9/01/2011 01:54:00 PM

Tomorrow the BLS will release the August Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 67,000 payroll jobs in August, and for the unemployment rate to hold steady at 9.1%.

Once again estimates all over the place, including more whispers of a negative headline number. This isn't surprising since the economic data for August was very weak - especially during the first couple weeks of the month as the shock of a possible U.S. government default rattled consumer and business confidence.

The BLS survey reference week includes the 12th of the month, and the 12th fell on a Friday in August - at the end of the 2nd full week and just after the economic freeze due to the D.C. debate. So even with slightly less worrisome economic reports towards the end of the month, it is possible that the headline number could be below consensus or even negative.

An added wrinkle was the labor dispute at Verizon. I've seen several estimates, but the Verizon dispute (since settled) probably reduced employment by 45,000 in August (these will be added back in September).

So these two factors, 1) a reference period right after a significant shock, and 2) the Verizon labor dispute, suggest a weak employment report.

Here is a summary of recent data:

• The ADP employment report showed an increase of 91,000 private sector payroll jobs in August. Of course ADP hasn't been very useful in predicting the BLS report. Also note that government payrolls have been shrinking by about 30,000 each month. The ADP does use the same reference week as the BLS, and this would suggest around 60,000 nonfarm payroll jobs added.

• Initial weekly unemployment claims averaged about 410,000 per week in August, down slightly from the 412,000 average in July.

• The ISM manufacturing employment index decreased to 51.8%, down from 53.5% in July. Based on a historical correlation between the ISM index and the BLS employment report for manufacturing, this reading suggests a decline of about 10,000 private payroll jobs for manufacturing in August. Note: The ISM non-manufacturing index for August will be released next Tuesday.

• The final July Reuters / University of Michigan consumer sentiment index decreased to 55.7 from 63.7 in July. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. This was probably impacted by the debt ceiling debate, but in general this would suggest a weak labor market.

• And on the unemployment rate from Gallup: Gallup Finds U.S. Unemployment Up in August

Unemployment, as measured by Gallup without seasonal adjustment, is at 9.1% at the end of August -- up from 8.8% at the end of July.

These data further confirm Gallup's mid-month prediction that the August unemployment rate that the government will report Friday will be higher than the 9.1% it reported in July -- barring another sizable decline in the U.S. workforce or an unusual seasonal adjustment.

NOTE: The Gallup poll results are Not Seasonally Adjusted (NSA), so use with caution. Usually the NSA unemployment rate declines in August, so this would suggest an increase in the unemployment rate.

Because of the reference period following so soon after an economic shock, and also because of the Verizon labor dispute, I'll take the "under" on the number of jobs added (less than 67,000). I'll also take the over on the unemployment rate (I expect higher than 9.1%).

by Calculated Risk on 9/01/2011 12:20:00 PM

Note on Auto Sales: Once all the reports are released, I'll post a graph of the estimated total August light vehicle sales (SAAR) - usually around 4 PM ET. The consensus is for a decrease to 12.1 million SAAR in August from 12.2 million SAAR in July. Sales in August 2010 were at a 11.44 million SAAR.

Catching up ... this morning from the Census Bureau reported that overall construction spending declined in July:

during July 2011 was estimated at a seasonally adjusted annual rate of $789.5 billion, 1.3 percent (±1.9%)* below the revised June estimate of $799.8 billion.

Private construction spending decline in July:

Spending on private construction was at a seasonally adjusted annual rate of $514.5 billion, 0.9 percent (±1.1%)* below the revised June estimate of $519.0 billion. Residential construction was at a seasonally adjusted annual rate of $248.1 billion in July, 1.4 percent (±1.3%) below the revised June estimate of $251.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $266.4 billion in July, 0.4 percent (±1.1%)* below the revised June estimate of $267.3 billion.

Click on graph for larger image in graph gallery.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 63% below the peak in early 2006, and non-residential spending is 36% below the peak in January 2008.

Private construction spending is mostly moving sideways, and it is public construction spending that is now declining. Note: Residential construction spending for May and June were revised up significantly.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, both private residential and non-residential construction spending has turned positive, but public spending is now falling sharply as the stimulus spending ends. The improvements in private non-residential are mostly due to energy spending.

by Calculated Risk on 9/01/2011 10:00:00 AM

PMI was at 50.6% in August, down from 50.9% in July. The employment index was at 51.8%, down from 53.5%, and new orders increased to 49.6%, up from 49.2%.

From the Institute for Supply Management: August 2011 Manufacturing ISM Report On Business®

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI registered 50.6 percent, a decrease of 0.3 percentage point from July, indicating expansion in the manufacturing sector for the 25th consecutive month, at a slightly slower rate. The Production Index registered 48.6 percent, indicating contraction for the first time since May of 2009, when it registered 45 percent. The New Orders and Backlog of Orders Indexes edged up slightly from July, but both indexes are indicating contraction in August at slower rates than in July. The rate of increase in prices slowed for the fourth consecutive month, dropping another 3.5 percentage points in August to 55.5 percent. The overall sentiment is one of concern and caution over the domestic and international economic environment, which is affecting customers' confidence and willingness to place orders, at least in the short term."

Click on graph for larger image in new window.

Here is a long term graph of the ISM manufacturing index.

This was above expectations of 48.5% and suggests manufacturing expanded - slowly - in August.

The regional surveys early in August were especially weak, but the surveys towards the end of the month were a little better - suggesting the debt ceiling debate impacted consumer and business confidence early in August.

by Calculated Risk on 9/01/2011 08:30:00 AM

The DOL reports:

In the week ending August 27, the advance figure for seasonally adjusted initial claims was 409,000, a decrease of 12,000 from the previous week's revised figure of 421,000. The 4-week moving average was 410,250, an increase of 1,750 from the previous week's revised average of 408,500.

The following graph shows the 4-week moving average of weekly claims since January 2000 (longer term graph in graph gallery).

Click on graph for larger image in graph gallery.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased this week to 410,250.

Weekly claims declined slightly, but the 4-week average is still elevated. Next week claims will probably increase due to Hurricane Irene.

Note: The Verizon strike added to claims the previous two weeks.

by Calculated Risk on 9/01/2011 12:12:00 AM

• From the WSJ: Germany's Resiliency Buoys Europe

A pair of bullish reports, on German employment and manufacturing, were reassuring on Wednesday: Unemployment remained at its lowest level in nearly two decades last month, while July machine orders jumped 9% from a year earlier. The latest data suggest that Europe's largest economy, which is expected to grow 3% this year, remains resilient ...

• This is similar to the recession measure graphs I posted from Doug Short: Real GDP per Capita

[Doug's] preferred GDP metric is the per-capita variant. I take real GDP and divide it by the mid-month population estimates from the Census Bureau, which has reported this data from 1959 (hence my 1960 starting date). By this measure, Q2 2011 GDP is 3.4% off its peak.

Check out the 2nd graph at Doug's site.

Earlier:
• ADP: Private Employment increased 91,000 in August
• CoreLogic: Home Price Index increased 0.8% in July
• Restaurant Performance Index declined in July
• Fannie Mae and Freddie Mac Serious Delinquency Rates mostly unchanged in July