Here's a brief outlook for tomorrow's employment situation report.
Let's compare various data out there to last month's data to get an idea of what to expect.
First a job creation report generated by employment services giant ADP. It is estimated based on statistics from ADP's many clients. It covers private jobs only.
- August: 89,000 (revised from 91,000)
- September: 91,000
Note that the ADP report is often very different from the BLS official report. There have been many claims that it is the seasonal adjustment factors that the BLS uses, but no one really knows why. Its accuracy is suspect, although it is widely watched.
Challenger Job Cut
A report generated by sifting through and categorizing various announcements of layoffs. It covers both public and private. I find it to be one of the more useful intra-monthly employment reports.
A big spike in Armed Forces layoffs from troop reductions as well as Bank of America (BAC) make this a special case. Omitting those, the numbers are in the 40,000s, on the low-ish side.
ISM Manufacturing and ISM Non Manufacturing Indices
These are reports that survey manufacturing and service firms on many topics from orders to pricing to employment in their company. The respondents rate each category and a consensus is created with above 50 indicating expansion, and below 50 indicating contraction. Employment outlooks are included.
ISM manufacturing indicated hiring, while ISM non manufacturing showed a small contraction.
Weekly Initial Claims
This government report details the number of initial jobless claims that are filed every week. It is a good leading indicator of employment, and the data is quickly available. However, it's best to have an average to make it the most effective.
- Last Month Average: 410,250
- This Month Average: 414,000
Unemployment In Major Cities
On September 28, the BLS announced the unemployment rate dropped in most cities. It cited unemployment rates dropping in 237 large metro areas, increasing in 103 and flat in 32. However, a lower participation rate may have affected these statistics.
From 40,000 to 45,000 will be added on from the settlement of the Verizon (VZ) strike. This provided a headwind last month, but will be a tailwind this time. Mining and manufacturing have been reporting employment gains and an improved outlook on exporting. Automotive has been reporting employment growth as U.S. domestic sales have improved on strong demand and improved supply.
This report will be an important data point to find out if companies are finally shrugging off the debt ceiling scare as well as the U.S. downgrade. Long-term interest rates have come down a bit since last month, but the uncertainty for both the economy in the near term and medium term will be a drag. August 2011, with little to no gain in employment, showed how strong the uncertainty was, and there's no reason to believe it will be much better. If it's any better at all, that's a sign of relief.
The numbers are quite similar to last month's lackluster report, ignoring the spike in the Challenger Job Cuts. The report from the cities also showed mostly better figures again.
Overall, I expect a similar month to last month, adding in the Verizon tailwind. Public sector will continue to lag but private will offer positive job growth. Look for a range of 50-100,000 jobs in private sector. The headline unemployment rate may decrease slightly, but overall this report should see mainly small gains. The wild card from the debt ceiling overhang and the ongoing crisis in Europe may lead to a worse or even much worse number than expected, similar to last month.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.