July Non-Farm Payrolls Preview
Estimates for July Non-Farm Payrolls show a very wide range (unchanged to -150k), with a median view of -75k following -62k in June. Many surveyed analysts have yet to adjust their estimates following the July ADP report.
The unemployment rate is expected at 5.6% from 5.5% prior. Manufacturers’ payrolls are expected to drop 40k in July after declining 33k in June. Average hourly earnings are expected to increase 0.3% and average workweek hours are expected to be unchanged at 33.7.
Government employment jobs should help whittle down the headline number in the July report, but further job losses in manufacturing and construction are expected in July as businesses continue to scale back production in response to rising energy costs and declining demand. Better overseas demand as a result of the weak USD represents one of the few bright spots in US manufacturing, though it is unlikely to have a significant impact in the July employment report.
The July ADP report revealed a worse than expected 65k drops in goods employment. The employment indices in the Empire Fed Index and Chicago PMI each declined further in July.
Service-sector employment is widely expected to be muted over the period, which may make goods based sector job declines that much more painful. Private sector jobs fell 22k in June following a 37 decline in April and would have been worse, save for increases in Education and Health employment.
The July ADP report revealed a surprising 74k increase in service sector jobs, which could yield a higher than expected print the July employment report; however, service sector jobs published in the ADP report have tended to overshoot those published in the government report over the past 8 months.
Initial Jobless Claims over the period were volatile and were impacted by seasonal factors and retooling in certain regions. Removing some of the noise from the claims data reveals a consistently upward trend over the period.
UofM Confidence data remained weak over the period which does not bode well for the July employment report. The typically volatile Household Survey for employment revealed a 155k decline in jobs following a 285k decline in May. The Monster Employment Index fell 3 points in June and is in negative territory on a y-o-y basis for the first time since the index’s inception in ’93.