Census hiring to provide a boost - Capital Economics
US Economics

Census hiring to provide a boost

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Written by Andrew Hunter
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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)

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)

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)

Sources: Refinitiv, Capital Economics


Andrew Hunter, Senior US Economist, andrew.hunter@capitaleconomics.com