by Calculated Risk on 9/04/2014 09:36:00 PM

Friday:
• At 8:30 AM, the Employment Report for August. The consensus is for an increase of 230,000 non-farm payroll jobs added in August, up from the 209,000 non-farm payroll jobs added in July. The consensus is for the unemployment rate to decrease to 6.1% in August. As always, a key will be the change in real wages - and as the unemployment rate falls, wage growth should eventually start to pickup.

From Nick Timiraos at the WSJ: Things to Watch in Friday’s Jobs Report

Any pickup in wages would provide a concrete sign of firming in the labor market, since few measures reflect the health of the job market like the price of labor. Average hourly wages rose just 1 cent in July to $24.45, an increase of 2% from a year earlier and the 60th straight month that year-on-year hourly wage growth has stayed below 2.5%. Before the recession, growth routinely exceeded 3%.

Also keep an eye on a change in the work week, which rose 0.3% in July from June, the first increase since April. Average weekly earnings, at $843.53, rose 2.3% from a year earlier in July.

by Calculated Risk on 9/04/2014 03:31:00 PM

Friday at 8:30 AM ET, the BLS will release the employment report for August. The consensus, according to Bloomberg, is for an increase of 230,000 non-farm payroll jobs in August (range of estimates between 195,000 and 279,000), and for the unemployment rate to decline to 6.1% from 6.2% in July.

Here is a summary of recent data:

• The ADP employment report showed an increase of 204,000 private sector payroll jobs in August. This was below expectations of 213,000 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 below expectations.

• The ISM manufacturing employment index decreased slightly in August to 58.1%. 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 25,000 in August. The ADP report indicated a 23,000 increase for manufacturing jobs in August.

The ISM non-manufacturing employment index increased in August to 57.1%. 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 jobs increased about 260,000 in August.

Combined, the ISM surveys suggest about 285,000 payroll jobs added in August (note that the ISM diffusion indexes are based on number of firms, not employees - and the timing is different).

• Initial weekly unemployment claims averaged close to 300,000 in August, down from 302,000 in July. For the BLS reference week (includes the 12th of the month), initial claims were at 299,000; this was down from 303,000 during the reference week in June.

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

• The final August Reuters / University of Michigan consumer sentiment index increased to 82.5 from the July reading of 81.8. 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 0.01% increase in small business employment in August (hours worked increase sharply in the Intuit index).

• Conclusion: The ADP report was lower in August than in July - and slightly below forecasts.  The ISM indexes were strong, and suggest hiring above the forecasts. Weekly unemployment claims were at the lowest level during the reference period in a number of years. However the Intuit small business index showed less hiring in August.

There is always some randomness to the employment report, but I expect the BLS will report over the consensus of 230,000 nonfarm payrolls jobs added in August. 

by Calculated Risk on 9/04/2014 12:25:00 PM

Earlier the Department of Commerce reported:

[T]otal July exports of $198.0 billion and imports of $238.6 billion resulted in a goods and services deficit of $40.5 billion, down from $40.8 billion in June, revised. July exports were $1.8 billion more than June exports of $196.2 billion. July imports were $1.6 billion more than June imports of $237.0 billion.

The trade deficit was smaller than the consensus forecast of $42.7 billion and the deficit was revised down for Q1 and Q2.

The first graph shows the monthly U.S. exports and imports in dollars through July 2014.

Click on graph for larger image.

Imports and exports increased in July.  

Exports are 19% above the pre-recession peak and up 4% compared to July 2013; imports are about 3% above the pre-recession peak, and up about 4% compared to July 2013. 

The second graph shows the U.S. trade deficit, with and without petroleum, through June.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $97.81 in July, up from $96.41 in June, and down up $97.07 in July 2013.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.

The trade deficit with China increased to $30.9 billion in July, from $30.1 billion in July 2013.

The trade deficit was revised down (exports up, imports down) for the previous six months.

by Calculated Risk on 9/04/2014 10:00:00 AM

The August ISM Non-manufacturing index was at 59.6%, up from 58.7% in July. The employment index increased in August to 57.1%, up from 56.0% in July. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: August 2014 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in August for the 55th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 59.6 percent in August, 0.9 percentage point higher than the July reading of 58.7 percent. This represents continued growth in the Non-Manufacturing sector. The August reading of 59.6 percent is the highest for the composite index since its inception in January 2008. The Non-Manufacturing Business Activity Index increased to 65 percent, which is 2.6 percentage points higher than the July reading of 62.4 percent, reflecting growth for the 61st consecutive month at a faster rate. This is the highest reading for the index since December of 2004 when the index also registered 65 percent. The New Orders Index registered 63.8 percent, 1.1 percentage points lower than the reading of 64.9 percent registered in July. The Employment Index increased 1.1 percentage points to 57.1 percent from the July reading of 56 percent and indicates growth for the sixth consecutive month. The Prices Index decreased 3.2 percentage points from the July reading of 60.9 percent to 57.7 percent, indicating prices increased at a slower rate in August when compared to July. According to the NMI®, 15 non-manufacturing industries reported growth in August. Respondents' comments vary by business and industry. The majority of the comments reflect continued optimism in regards to business conditions. Some respondents indicate that there may be some tapering off in the recent strong rate of growth in the non-manufacturing sector."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was solidly above the consensus forecast of 57.1% and suggests faster expansion in August than in July.

The NMI was at the highest level since its inception.  New orders was strong - and employment was up solidly.

by Calculated Risk on 9/04/2014 08:33:00 AM

The DOL reports:

In the week ending August 30, the advance figure for seasonally adjusted initial claims was 302,000, an increase of 4,000 from the previous week's unrevised level of 298,000. The 4-week moving average was 302,750, an increase of 3,000 from the previous week's unrevised average of 299,750.

There were no special factors impacting this week's initial claims.

The previous week was unrevised at 298,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 302,750.

This was close to the consensus forecast of 305,000.