by Calculated Risk on 8/05/2021 11:45:00 AM
On Friday at 8:30 AM ET, the BLS will release the employment report for July. The consensus is for 900 thousand jobs added, and for the unemployment rate to decrease to 5.7%.
There were 850,000 jobs added in June, and the unemployment rate was at 5.9%.
o First, currently there are still about 6.8 million fewer jobs than in February 2020 (before the pandemic).
This graph shows the job losses from the start of the employment recession, in percentage terms.
The current employment recession was by far the worst recession since WWII in percentage terms, but is now better than the worst of the “Great Recession”.
o ADP Report: The ADP employment report showed a gain of 330,000 private sector jobs, well below the consensus estimate of 675,000 jobs added. The ADP report hasn’t been very useful in predicting the BLS report, but this suggests the BLS report could be below expectations.
o ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires). The ISM(R) manufacturing employment index increased in July to 52.9%, up from 49.9% last month. This would suggest little change in manufacturing employment in July. ADP showed 8,000 manufacturing jobs added.
The ISM(R) Services employment index increased in July to 53.8%, from 49.3% last month. This would suggest about 175,000 service jobs added in April. ADP showed 318,000 service jobs added.
In general, the ISM indexes suggest employment growth below expectations.
o Unemployment Claims: The weekly claims report showed a small increase in the number of initial unemployment claims during the reference week (include the 12th of the month) from 418,000 in June to 424,000 in July. This would usually suggest about the same turnover in July as in June, although this might not be very useful right now. In general, weekly claims have been close to expectations in July.
This graph shows permanent job losers as a percent of the pre-recession peak in employment through the June report.
This data is only available back to 1994, so there is only data for three recessions. In June, the number of permanent job losers decreased to 3.187 million from 3.234 million in May. These jobs will likely be the hardest to recover.
o IMPORTANT: The employment report will probably show a large increase in state and local government education hiring. This is because of a quirk in the seasonal adjustment due to fewer educators hired this year due to the pandemic, so fewer educators will be let go in July.
o Conclusion: The data suggests a weaker than expected report in July. There are some seasonal factors that will boost the BLS report (especially related to education).