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Employment Report: Scheduled for release 8:30 A.M. ET, Friday Sept. 5

  • Importance (A-F): This release merits an A.
  • Source: Bureau of Labor Statistics, U.S. Department of Labor.
  • Release Time: First Friday of the month at 8:30 ET for the prior month
  • Raw Data Available At: http://stats.bls.gov/news.release/empsit.toc.htm.

The employment report is actually two separate reports which are the results of two separate surveys. The household survey is a survey of roughly 60,000 households. This survey produces the unemployment rate. The establishment survey is a survey of 375,000 businesses. This survey produces the nonfarm payrolls, average workweek, and average hourly earnings figures, to name a few. Both surveys cover the payroll period which includes the 12th of each month.

The reports both measure employment levels, just from different angles. Due to the vastly different size of the survey samples (the establishment survey not only surveys more businesses, but each business employs many individuals), the measures of employment may differ markedly from month to month. The household survey is used only for the unemployment measure - the market focuses primarily on the more comprehensive establishment survey. Together, these two surveys make up the employment report, the most timely and broad indicator of economic activity released each month.

Total payrolls are broken down into sectors such as manufacturing, mining, construction, services, and government. The markets follows these components closely as indicators of the trends in sectors of the economy; the manufacturing sector is watched the most closely as it often leads the business cycle. The data also include breakdowns of hours worked, overtime, and average hourly earnings.

The average workweek (also known as hours worked) is important for two reasons. First, it is a critical determinant of such monthly indicators as industrial production and personal income. Second, it is considered a useful indicator of labor market conditions: a rising workweek early in the business cycle may be the first indication that employers are preparing to boost their payrolls, while late in the cycle a rising workweek may indicate that employers are having difficulty finding qualified applicants for open positions. Average earnings are closely followed as an indicator of potential inflation. Like the price of any good or service, the price of labor reacts to an overly accommodative monetary policy. If the price of labor is rising sharply, it may be an indication that too much money is chasing too few goods, or in this case employees.

Highlights

  • The decline of 51,000 in payrolls represents a 0.04% drop that is consistent with the recent trend of declines at about a 0.5% annual rate. This rate of decline in payrolls correlates with about 1.5% to 2% real GDP growth. That, of course, is consistent with the second quarter GDP number released yesterday.
  • Other data in the release are generally in line with trend. Average hourly earnings rose 0.3% for the third straight month. Th average workweek dipped, but the stable manufacturing workweek and overtime hours numbers suggest a near flat manufacturing component in industrial production.
  • The data bring no major surprises and won't change economic perceptions.

Big Picture

Payroll trends are weak, but not as weak as in true recessions. The average monthly decline in payrolls so far in 2008 is 65,000. In the 2001 recession, payrolls held up well the first three months, actually increasing by a net 15,000. In April 2001, however, payrolls plunged 281,000. That was followed by declines averaging 115,000 per month the next four months. Payrolls plunged even further after 9/11/2001. The current trend in payrolls equates to about a 0.6% annual rate of decline. Given productivity gains, this correlates with modest real GDP growth rather than declines in real GDP even without the impact of the fiscal stimulus. Payrolls may not trend higher until late this year even with decent second and third quarter real GDP gains.

Source: Preview of Friday's Jobs Report