We estimate that non-farm payrolls increased by a more modest one million in August and without the restarting of field operations for the 2020 Census, which probably added 250,000 jobs, employment growth would have slowed even more sharply.
We estimate that non-farm payrolls increased by a more modest one million in August and without the restarting of field operations for the 2020 Census, which probably added 250,000 jobs, employment growth would have slowed even more sharply.
The 1,763,000 rise in payrolls in July provided some reassurance that the renewed wave of coronavirus infections had not yet pushed the recovery into reverse, despite the re-imposition of restrictions on activity in a number of states and the slowdown evident in a range of high-frequency consumption indicators. (See Chart 1.) But that strength partly reflected the timing of the payroll survey in the second week of the month, with most indicators suggesting that, despite the slowdown, activity was still higher in early July than it was at the start of June.
Chart 1: Consumption Indicators (%y/y) |
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Sources: OpenTable, TSA, STR |
Although they have started to pick up again over the past couple of weeks, as the number of new coronavirus cases has started trending lower, those same indicators showed little improvement between early July and early August, which is consistent with the downbeat message from the Homebase data on hours worked at small businesses. The latter could also reflect the fading boost from the PPP loans programme, with those firms already receiving forgiveness on their loans now free to lay off workers again. Overall, this suggests we should be braced for a much weaker payroll gain this month.
Admittedly, the high-frequency data still generally point to a small increase in employment and most of the more tried-and-tested labour market indicators have also continued to improve. Initial jobless claims have mostly continued to trend lower, while the employment indices of the Markit PMIs both jumped decisively above 50 in August.
The August payroll figures will also receive a boost from temporary hiring for the 2020 Census. After being delayed by the pandemic, field operations in most Census offices restarted on 11th August, with the Census Bureau reporting that the number of temporary workers had surged to 290,000 in the August payroll reference week, compared to 50,000 in July. The upshot is that Census hiring should have added 240,000 to non-farm payrolls in August and could provide a further boost in September although, as in previous Census years, that will be reversed over the following months. (See Chart 2.)
Chart 2: Temporary Census Employment (000s) |
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Source: BLS |
Overall, we expect a slightly softer one million gain in non-farm payrolls in August, with the gain excluding Census workers closer to 750,000. The unemployment rate probably fell only marginally to 10.0%, from 10.2% – there are still plenty of workers who left the labour force in March and April ready to come back into employment, particularly now that the enhanced unemployment benefits have expired, and Census workers are also usually drawn from outside the labour force rather than from the ranks of the unemployed. That said, we still expect the unemployment rate to fall to 8.0% by year-end.
Table 1: Employment Data | ||||||||||
Labour Market Indicators | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug1 | Implication for Payroll Growth | |
Jobless Claims (Monthly Ave.) | 213 | 214 | 2,667 | 5,040 | 2,608 | 1,499 | 1,369 | 1,068 | Better | |
Jobless Claims (for week including the 12th) | 220 | 215 | 282 | 4,442 | 2,446 | 1,540 | 1,422 | 1,104 | Better | |
Challenger Job Cut Announcements (SA) | 57.3 | 52.1 | 215.0 | 705.2 | 384.9 | 187.5 | 285.6 | – | Worse | |
Job Openings Rate | 4.4 | 4.4 | 3.8 | 3.7 | 3.9 | 4.1 | – | – | Better | |
Markit Manufacturing Employment Index | 51.1 | 50.5 | 47.0 | 36.4 | 38.0 | 47.9 | 49.6 | 53.2 | Better | |
Markit Services Employment Index | 51.8 | 51.0 | 47.5 | 35.6 | 37.8 | 49.4 | 51.0 | 55.2 | Better | |
ADP Private Payroll Employment Survey | 205 | 147 | -302 | -19,409 | 3,341 | 4,314 | 167 | – | Worse | |
CE Estimated Change in Non-Farm Payrolls2 | 223 | 241 | 95 | -22,500 | -9,000 | 5,000 | 1,000 | 1,000 | ||
Consensus Forecast for Non-Farm Payrolls | 160 | 175 | -100 | -4,250 | -8,000 | 3,000 | 1,600 | 1,550 | ||
Actual Change in Non-Farm Payrolls | 214 | 251 | -1,373 | -20,787 | 2,725 | 4,791 | 1,763 | – | ||
Actual Change in Private Payrolls | 179 | 220 | -1,356 | -19,835 | 3,236 | 4,737 | 1,462 | – | ||
Consensus Forecast | ||||||||||
Other Employment Report Data | ||||||||||
Unemployment Rate (%) | 3.6 | 3.5 | 4.4 | 14.7 | 13.3 | 11.1 | 10.2 | 10.0 | 9.9 | |
Change in Household Employment | -89 | 45 | -2,987 | -22,369 | 3,839 | 4,940 | 1,350 | – | – | |
All Employees Hours Worked | 34.3 | 34.4 | 34.1 | 34.2 | 34.7 | 34.6 | 34.5 | 34.4 | 34.5 | |
All Employees Ave. Hourly Earnings (%m/m) | 0.2 | 0.3 | 0.6 | 4.7 | -1.1 | -1.3 | 0.2 | 0.2 | 0.0 | |
All Employees Ave. Hourly Earnings (%y/y) | 3.1 | 3.0 | 3.4 | 8.0 | 6.6 | 4.9 | 4.8 | 4.6 | 4.4 | |
Sources: Refinitiv, Markit, Capital Economics 1Figures in blue are forecasts 2Based on the CE dynamic factor model. The model has a MSE of 41,000 and beats the consensus forecast 65% of the time. | ||||||||||
Chart 3: Actual & Estimated Change in Non-Farm Payrolls (000s) |
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Sources: Refinitiv, Capital Economics |
Andrew Hunter, Senior US Economist, andrew.hunter@capitaleconomics.com