Yep it’s another freaking economic indicator. But an important one – US non-farm payrolls.
And with markets seemingly on hold ahead of the _____ report (please insert your favoured adjective) there’s time to get up to speed
The Reuters consensus forecast is for non-farm payrolls to have declined 100,000 in August – a third consecutive month of losses – and for an unemployment rate of 9.6 per cent. In July the corresponding figures were -131,000 and 9.5 per cent respectively.
Bloomberg, is forecasting a slightly larger fall (105,00) and the same jobless rate.
However, the market won’t focus on the headline number because that is skewed by end of temporary census jobs. As such everyone will be looking at the private payroll numbers, which exclude government agencies and are thus considered a better barometer of the US labour market’s underlying group.
And here Bloomberg and Reuters both see private payrolls rising 41,000, down from 71,000 in July.
However, not everyone is that positive. Jan Hatzius’s team at Goldman Sachs are going for no change in private payrolls:
(emphais throughout ours)
We expect no change in private nonfarm payrolls in August and a 125,000 overall decline due to the reduction of temporary Census employment. The information received this week—including jobless claims, survey data, the ADP private-sector payroll forecast, and job advertising indexes—has been broadly consistent with our below-consensus forecast.
The recovery of the labor market has stalled in recent months. Following an impressive rate of private-sector job creation in March and April, the rate of hiring has slowed appreciably since May. The three-month average change in private payrolls, for example, slowed from 154,000 in April to 51,000 in July. Private employment in the household survey—calculated as employment in nonagricultural industries, excluding government wage & salary workers—tells a similar story.
If Goldman’s pessimism is borne out expect to hear more talk about QE2
Deutsche Bank is also worried about the deteriorating trend in private payrolls:
Previewing today’s payrolls, market forecasters are looking for a third consecutive negative headline print of -105k, with the unemployment rate at 9.6%. Continued noise around census layoffs means that the focus will again be on private payrolls with the broader market looking for a +40k increase in August. The private sector has net created a total of 622k jobs since last November (the point we turned positive after nearly 2 years of declines). This is still a fairly low number compared to the 8.459million private jobs lost during that period. The trend has also deteriorated. After the solid gains in March (+158k) and April (+241k) the series declined sharply in May (+51k), June (+31k) and July (+71k). The outlook for labour markets holds the key to recovery and policy making into the future.
But at least this weeks ISM fuelled dead cat bounce has removed some of the fear factor heading into the report. reckons RBS’s Gregg Gibbs.
For the first time in a few months, we are not entering Non-Farm Payrolls at local extremes, as 10yrs are approximately 22bps off their low yields from last week. The correction over the last few days, assisted by better ISM, has removed some of the high fear level of tomorrow’s data, though anecdotally I still find most think “it will be bad.” I still see a further technical correction, and within a 100k band around consensus I feel a strong number would hit the market more than a weak number would benefit it. There is an obvious risk that a very weak Private Payrolls number accompanied by an increase in the Unemployment Rate will re-spark talk of more quantitative easing from the Fed, and deservedly so. If you have caught the correction from last Friday, it would be prudent to reduce risk into this Employment report, where arguably more is on the line than the last few reports combined. I still think the near term bias in Treasuries is lower (in price) barring a really weak number tomorrow.
The fun begins at 13.30 (BST).
Related links:
There’s hope for US payrolls yet, says RBC - FT Alphaville
El-Erian on why the payrolls report matters – FT Alphaville
Unemployment report indicates ‘jobless recovery’ – NPR