| Payrolls are expected to have gained 113k in September according to a Reuter’s survey, below the 139k average over the first 8-months of the year, but above the 96k reading seen in August.The unemployment rate is forecast to have risen in September to 8.2% from 8.1% as job gains fail to keep pace with the growth in the labour force. Fed Chairman Bernanke pledged this month to continue pumping money into the system until employment recovers.
Peter D’Antonio, an economist at Citigroup says “We’re looking for pretty sluggish payroll growth. This will be more of the same, what Bernanke called ‘worrisome.’ It may reflect weakness coming from abroad, weakness in manufacturing, and the hiring situation is not being helped by concerns over the fiscal cliff.
This month’s non-farm report marks the next-to-last employment figures before the November elections, in which economic issues play a key role, and of course none is greater to the US electorate than employment. Only one president, Ronald Reagan, has been re-elected since WW2 with a jobless rate above 6%. The unemployment rate has exceeded 8% since February 2009, the longest stretch in monthly records dating back to 1948.
Federal Reserve Bank of Chicago President Charles Evans has called for accommodation so long as unemployment exceeds 7% and inflation remains below 3%. On September 20th, Fed Bank of Minneapolis President Kocherlakota said the central bank should keep rates near zero until the jobless falls below 5.5% and inflation doesn’t exceed 2.25%.
Manufacturing has been a pillar of the early stages of the recovery, but has started waning in recent months. The ISM manufacturing reading for September saw a slight improvement from August, but was still only marginally above the 50 level at 51.5. It was the first month out of the last four that manufacturing expanded.
The employment component of ISM manufacturing was actually fairly robust at 54.7 in September from 51.6 August. Whether this will be reflected in the manufacturing payrolls however remains to be seen. German manufacturing giant Siemens AG recently announced some 615 job cuts at its US factories after a “significant drop in new orders,” according to a message to employees obtained by Bloomberg.
Manufacturing payrolls are forecast to come in flat in September from -15k in August according to a Reuter’s survey.
Alternative viewpoint
Analysts at TrimTabs investment research believe the no. of new positions estimated by the US BLS may be hugely understated. They believe the US economy probably added 210,000 jobs according to their research.
TrimTabs say the economy is gaining momentum, leading to job gains in interest sensitive sectors. “We believe artificially low interest rates are boosting demand for housing, mortgage refinancing, and cars,” it says.
Their employment forecast is based on the amount of daily income tax paid to the US Treasury from all salaried employees, according to the firm. They say this gives a more accurate real-time view of job trends than the government’s estimate.
TrimTabs say however, that they don’t believe the pick-up in jobs is sustainable long-term, in large part due to extra costs related to US health care reforms that are scheduled to take effect on January 1st.
Economic data
The employment data we’ve seen in September has presented a very mixed picture. The employment components of ISM manufacturing, Philadelphia Fed and Consumer Confidence – Jobs plentiful have been better, whilst ADP, Chicago Fed and the Consumer Confidence – not so plentiful figures have been worse. Itis, therefore, quite difficult to predict what the direction of this month’s non-farm payrolls will be. The table below illustrates the mixed picture of the employment figures over the last month: |
