Why BLS May Have Slower Payrolls Growth in July

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The first Friday of every month gives economists, investors, employers and workers a rather live snapshot of the U.S. labor market. The Bureau of Labor Statistics will report the employment situation for July on Friday, August 4, 2017.

While all economic forecasts this many days ahead of such a key number are always subject to change, the preliminary view from the economists is that the markets should be braced for a strong payrolls gain that is still less strong than what was seen in June. This is true for total nonfarm payrolls and for the more pertinent private sector payrolls.

Another consideration here is that there will be many views on payrolls between now and Friday. Any host of those numbers can alter the consensus economist expectations if there are some major surprises.

The 4.4% official unemployment rate is expected to drop to 4.3% by Bloomberg and by Reuters alike.

June’s preliminary reading on nonfarm payrolls was 222,000, and this is likely to be revised. Bloomberg has an estimate of 180,000 for July, and Reuters shows a consensus estimate of 183,000.

The preliminary June reading on private sector payrolls was 187,000, and this is figure also likely will be revised. Bloomberg has its consensus estimate 175,000 for July, and Reuters shows a consensus estimate of 180,000.

Both Bloomberg and Reuters see the July manufacturing payrolls coming in at 5,000. The preliminary June figure was a gain of 1,000, but that is also subject to being revised.

Bloomberg shows the average hourly earnings to be up 0.3% in July (from 0.2% in June) on the monthly reading, and it sees July’s average hourly earnings up 2.5% on the annualized reading (same as in June).

These various labor market subsets come from a household survey of roughly 60,000 households. Again, each month’s reports are subject to revisions in the forward months. Other key reports that may have an impact on this key BLS report are as follows, with consensus estimates from Bloomberg if available:

  • 8/2: ADP Employment Report was 158,000 in June; and the July consensus reading is 175,000 from Bloomberg and 185,000 from Reuters.
  • 8/2: Gallup U.S. Job Creation Index was 36,000 in June (no estimate for July).
  • 8/3: Challenger Job-Cut Report was 31,105 in June (no estimate for July).
  • 8/3: Weekly jobless claims (BLS for week of 7/29) was 244,000 the prior week and the consensus is 244,000.

Also worth noting is that there will be employment and jobs components for hiring and for wage pressure from the PMI Manufacturing and the ISM Manufacturing reports on Tuesday, followed by the PMI Services report and the ISM Non-Manufacturing on Thursday.

The July 11 Job Openings and Labor Turnover Survey (JOLTS) report showed that there were 5.666 million job openings in May, versus 5.967 million in April.

So far we are seeing more evidence pointing to slower payroll growth for July. Whether that changes as other preliminary jobs reports come out this week remains to be seen.