Published September 3, 2020
August Employment Preview
On Friday at 8:30 AM ET, the BLS will release the employment report for August. The consensus is for an increase of 1.4 million non-farm payroll jobs, and for the unemployment rate to decrease to 9.8%.
There will be at least two distortions to the August report. (For details, see: August Employment Report: Comments on Temporary Decennial Census Hiring and Education). The decennial Census will add 237,800 temporary jobs (the jobs data should be reported ex-Census to show the underlying trend). Also, due to the delays in school openings, the usual number of educators were probably not hired in August. The BLS model will expect about 415,000 seasonal education jobs added in August. If fewer jobs are added, the BLS will report that education jobs were lost Seasonally Adjusted. For example, if only 115,000 jobs are added in August, then the BLS will report around 300 thousand education jobs lost.
The ADP employment report showed a gain of 428,000 private sector jobs, far below the consensus estimate of 900 thousand jobs. The ADP report hasn't been very useful in predicting the BLS report, but this suggests the BLS report could be weaker than expected.
The ISM manufacturing employment index increased in August to 46.3% from 44.3% in July, but still well below 50. This would suggest around 40,000 manufacturing jobs lost in August - although ADP showed 9,000 manufacturing jobs added.
The ISM Services employment index increased in August to 47.9%, from 42.1% in July, and is still below 50. This would suggest little change in service jobs lost in August. Combined, the ISM surveys suggest around 40,000 private sector jobs lost in July.
The weekly claims report showed a high number total continuing unemployment claims during the reference week, although this was down about 2 million from the reference week in July.
There are other indicators that analysts are looking at - like Homebase hours worked (see Ernie Tedeschi comments). Ernie estimates 800 thousand jobs added (SA) and for the unemployment rate to decline to 9.4%. This doesn't include temporary decennial hiring, and also excludes any distortion from education delays.
Merrill Lynch forecasts: "August nonfarm payrolls are likely to rise by 1.2mn and the unemployment rate should improve to 9.6%, falling back down to single digit territory."
• Conclusion: There is a wide range of estimates for the August report. In general, the employment related data has been weaker than expected, and I'll take the under, ex-Census.
The key economic reports this week are August Housing Starts and Retail Sales.
For manufacturing, August Industrial Production, and the September New York and Philly Fed surveys, will be released this week.
The FOMC meets this week, and no change to policy is expected.
No major economic releases scheduled.
8:30 AM ET: The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of 5.9, up from 3.7.
9:15 AM: The Fed will release Industrial Production and Capacity Utilization for August.
This graph shows industrial production since 1967.
The consensus is for a 1.0% increase in Industrial Production, and for Capacity Utilization to increase to 71.5%.
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
8:30 AM ET: Retail sales for August will be released. The consensus is for a 1.0% increase in retail sales.
This graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales, ex-gasoline, increased by 4.2% on a YoY basis in July.
10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of 78, unchanged from 78 in August. Any number above 50 indicates that more builders view sales conditions as good than poor.
2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.
2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.
2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.
8:30 AM: Housing Starts for August.
This graph shows single and total housing starts since 1968.
The consensus is for 1.470 million SAAR, down from 1.496 million SAAR.
8:30 AM: The initial weekly unemployment claims report will be released. The early consensus is for a 900 thousand initial claims, up from 884 thousand the previous week.
8:30 AM: the Philly Fed manufacturing survey for September. The consensus is for a reading of 15.5, down from 17.2.
10:00 AM: State Employment and Unemployment (Monthly) for August 2020
10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for September).
Original article posted in calculatedriskblog.com
