What To Expect From October 2011 Employment Report

by: Neal Razi

Here's my 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. Last month's official BLS statistics were 103,000 jobs created for the month overall, 137,000 private jobs and an unemployment rate of 9.1%

ADP Employment

First a job creation report generated by employment services giant ADP. It is estimated based on statistics from ADP's clients. It covers private jobs only.

  • September: 116,000 (revised from 91,000)
  • October: 110,000

Overall comparison: Very similar.

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.

  • September: 115,730 (includes a large spike from military reductions)
  • October: 42,759

Overall comparison: Similar.

A big spike in Armed Forces layoffs from troop reductions as well as Bank of America (NYSE:BAC) were a special case last time. Omitting those, the numbers were in the 40,000s, similar to this month

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, and the same scale used.

ISM manufacturing indicated moderate strength in hiring with a similar 53.5

ISM non manufacturing showed moderate employment growth too, changing from 48.7 to 53.3.

Overall comparison: Slight Improvement.

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: 414,000
  • This Month Average: 404,500

Overall Comparison: Slight Improvement.

Unemployment In Major Cities

On November 2, the BLS announced the unemployment rate dropped in about 75% of the cities since the last report. It cited unemployment rates dropping in 280 large metro areas, increasing in 61 and flat in 31. This may have been affected by the start of the school year, however.

Special Circumstances

Skittishness over the worsening European debt problems may hold back hiring. 3M (NYSE:MMM), an early cycle manufacturer, showed weakness in orders. The financial sector's employment has really been clobbered of late. Seasonal adjustments may play a negative role this month.

Summary

The economy has been posting stronger and stronger statistics (although still moderate at best) and is back to showing the same continued slow growth pattern. The scare from the debacle over the U.S. debt ceiling continues to fade, with the economy weathering yet another shock. Governments continue to cut employment, while private sector continues to moderately expand.

With this in mind, as well as the data above, I expect a similar and perhaps slightly stronger employment situation report tomorrow. I'm guessing the overall non-farm payrolls will increase by about 110,000 and the private sector will be upwards of 140,000. The headline number should be little change at 9.0 - 9.1%. Seasonal adjustments may negatively affect the data. There is still the continuing uncertainty of the European debt crisis that could push these numbers to the downside, but overall I don't expect a lot of surprises this time around.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.