Anticipating Friday's Employment Report: A Stunner From TrimTabs

by: Doug Short

The most important economic news this week is Friday's employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, probably the most significant in the near term being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository).

Today we have a July estimate from ADP at 200K new jobs and a shockingly low TrimTabs estimate of 23K new jobs.

The ADP 200K estimate came in above the estimate of 180K, and was looking for 175K. And ADP's number for June was revised upward to 198K from 188K.

Here is the press release from TrimTabs on today's stunner:

TrimTabs Investment Research estimates that the U.S. economy added 23,000 jobs in July, down sharply from 135,000 jobs in May and 182,000 jobs in June. "Job growth this month was the slowest since September 2010 when the U.S. lost 65,000 jobs," said David Santschi, Chief Executive Officer of TrimTabs. "The surge in mortgage rates seems to be hitting the economy hard."

In a research note, TrimTabs attributed the weakness in the labor market mostly to higher borrowing costs as well as looming Obamacare mandates and slowing growth in emerging economies.

TrimTabs’ employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. They are historically more accurate than the initial estimates from the Bureau of Labor Statistics.

TrimTabs also reported that wages and salaries increased a scant 0.4% year-over-year in real terms in July, the lowest growth of the year. This level of growth is consistent with an economy that is close to stalling.

"The economy is much weaker than most investors realize," said Santschi. "Most Wall Street economists expect the Fed to scale back the pace of money printing in September, but I suspect any changes will be very modest because the economy is so fragile."

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Here is a visualization of the three series over the past 12 months, ending with the ADP and TrimTabs estimates for June.

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A key difference among the three is that the ADP and the BLS series are subject to substantial revision. Here, for example is an illustration of the ADP revisions from January of last year through March of this year.

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The estimate for Friday's nonfarm jobs number is 184K. is looking for a smaller 175K.

For a sense of the critical importance of nonfarm employment for the economy, see my Big Four Economic Indicators, which I'll be updating on Friday after the latest BLS employment report is published.