Non-farm payrolls preview: Why August jobs are likely to disappoint

nonfarm payrolls

We won’t have to wait long for the non-farm payrolls report as the calendar turns to September on a Friday.

There’s a big quirk in the August jobs report, as the initial data tends to run below the consensus. It’s missed to the downside (before revisions) in 17 of the past 22 years. Last year was an exception, but only barely at +315K versus 300K expected but the year before it missed by nearly 500K.

Could this be another miss? Let’s look at the numbers:

  • Consensus estimate +170K
  • Private +150K
  • July +187K
  • Unemployment rate consensus estimate: 3.5% vs 3.5% prior
  • Participation rate consensus 62.6% prior
  • Prior underemployment U6 prior 6.7%
  • Avg hourly earnings y/y exp +4.4% y/y vs +4.4% prior
  • Avg hourly earnings m/m exp +0.3% vs +0.4% prior
  • Avg weekly hours exp 34.3 vs 34.3 prior

August jobs so far:

  • ADP report +177K vs 195K expected and +371K prior
  • ISM services employment not yet released
  • ISM manufacturing employment not yet released (coming later on Friday)
  • Challenger Job Cuts 75.15K vs 23.70K prior, up 210% y/y
  • Philly employment -6 vs -1 prior
  • Empire employment -1.4 vs +4.7 prior
  • Initial jobless claims survey week 232K vs 221K last month

The data is due out at 8:30 am ET on Friday, that’s 1330 GMT.

In the FX market, the reaction will be straight-forward initially with the US dollar rising on a beat and falling on a miss, particularly against the euro and yen. Where it will be more complicated is in the equity market and that could ultimately reverberate back into the currency market. This week, bad news has been seen as good news for stocks as it means that the Fed will no longer hike rates. But that trade could be running out of rope as the market probabilities of a Sept hike are at 10% and 45% for November, with nothing beyond that.

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