US jobs preview

Via Calculated Risk:

On Friday at 8:30 AM ET, the BLS will release the employment report for July. The consensus is for an increase of 1.58 million non-farm payroll jobs (+1.47 million private sector), and for the unemployment rate to decrease to 10.5%.

The usual indicators are somewhat useless again this month due to the ongoing pandemic.   Some states are opening up, while others have closed bars, indoor restaurants, and some other businesses.   In states with rising cases, economic activity appears to have flattened or declined in July.

The ADP employment report showed a gain of 167,000 private sector jobs, far below the consensus estimate of 1.5 million jobs.

The ISM manufacturing employment index increased in July to 44.3% from 42.1% in June, but still well below 50.   This would suggest around 50,000 manufacturing jobs lost in July – although ADP showed 10,000 manufacturing jobs added.

The ISM Services employment index increased in July to 42.1% from 43.1% in June, and is still well below 50. This would suggest around 140,000 service jobs lost in July. Combined, the ISM surveys suggest around 190,000 private sector jobs lost in July.

The weekly claims report shows a high number of initial claims during the BLS reference week, although the number of continuing claims dropped significant from the June reference to the July reference week (suggesting people going back to work).

There are other indicators that analysts are looking at – like Homebase hours worked and the experimental Household Pulse Survey.  The Homebase data suggests employment was mostly flat, and the Pulse Survey might suggest a significant decline in employment.

IMPORTANT: The employment report will probably show a large increase in state and local government education hiring.  This is because of a quirk in the seasonal adjustment due to educators being let go earlier than usual this year due to the pandemic, see: State and Local Government Education Employment will Increase Sharply in July, Seasonally Adjusted

Also, the Decennial Census hired around 27,000 temporary workers that will show up in government hires.

• Conclusion: There is a wide range of estimates for the July report.   I expect to see a large number of government jobs added (mostly due to a statistical quirk – but also due to temporary Decennial Census hiring).   I’ll take the over on government jobs added, but the under on private sector jobs (consensus is 1.47 million private sector – and possibly even a negative private sector number).

No matter what the July report shows, there will be millions and millions of people unemployed, and the course of the economy will be determined by the course of the virus.

David Llewellyn-Smith
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  1. DingwallMEMBER

    .No matter what the July report shows, there will be millions and millions of people unemployed, and the course of the economy will be determined by the course of the virus. the markets will explode higher on the great horrible flat news

  2. The US jobs number is irrelevant these days. It is stimulus all the way — till the bitter end.

    Good news is good news and bad news is good news. Will not change from here on.

      • I’m suggesting the Keynesians / Monetarists are in charge of monetary policy and economic slumps of any kind have been banned since the turn of the century. Ergo, Keynesian and monetarist prescriptions i.e. deficit spending and monetisation of gubbermint debt.

        Simple and clean.

        The corporatists, as you call them, are just along for the ride. Bet they can’t believe their luck having dilberts in charge at the central banks. Free money for their customers and plenty of inflation for their stock prices. What’s not to love?

        • Still don’t understand where you gather that Keynesians have anything to do with monetarism or quasi monetarism … lest you forget the fall out from Laffer and a return to the MPS social template. Really not that different to Hayek’s latter day move to Ordoliberalism to save his backside.

          • The system we have in place currently is a hybrid of both Keynesian and monetarist economics — I am not suggesting they are the same thing, just that there are complementarities i.e. both argue for state intervention in the economy and monetarism allows for deficit-spending (a central plank in Keynesian economic management) to be monetized.