Two Encouraging Updates For The Labor Market

We have two new updates on the labor market today and both sets of numbers are encouraging. The ADP Employment Report advises that nonfarm private payrolls rose a respectable 201,000 in August, up from July’s 173,000 increase and the highest since March. Meanwhile, initial jobless claims dropped last week, falling by a seasonally adjusted 12,000—the biggest weekly decline since July. You still can’t assume much in economic analysis these days, but for the moment we’re batting a thousand when it comes to the data points du jour.

Let’s take a closer look at today’s employment numbers, starting with the ADP estimate. As the chart below shows, the latest figures suggest that tomorrow’s official payrolls report for August from the Labor Department will also bring news of stronger job growth. Running a regression analysis on the past 10 years of monthly changes for both series spits out a handsome forecast: a 200,000-plus increase (excluding government jobs) in private-sector employment for August. If so, that would represent a substantial upside surprise. Indeed, the consensus forecast among economists via Briefing.com is looking for a slowdown in the pace of growth in the Labor Department’s numbers: 144,000 for August private payrolls, down from July’s reported 172,000.

Turning to initial jobless claims, new filings for unemployment benefits fell 12,000 last week to a seasonally adjusted 365,000, or near a four-year low. Recent history suggests that the pace of the decline has slowed if not hit a wall. But for the moment, there’s no sign that this indicator is trending higher, which would be a dark signal.

Looking at the year-over-year change in new claims (before any seasonal adjustment) looks a bit better. Last week’s number shows that claims dropped in unadjusted terms by nearly 12% vs. the year-earlier level. That’s in line with recent history and a strong signal that new filings will continue to drift lower in the weeks and months ahead.

It all adds up to an encouraging profile for the labor market. But we’ll need a good number from the government to seal the deal. For now, it’s easy to think positively.

Today’s ADP update is “good news for the economy if it turns out to be correct,” Joel Naroff, president of Naroff Economic Advisors opined in an email to clients, according to Bloomberg. “We may not be seeing a deluge of new jobs but it clearly looks like firms are hiring again.”

About James Picerno 895 Articles

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers.

Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg, Dow Jones, Reuters.

Visit: The Capital Spectator

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