Before starting, it’s important to remember that the U.S. employment report presents statistics from two major surveys, the Current Population Survey (CPS; household survey) and the Current Employment Statistics survey (CES; establishment survey). The most important thing is that, according to the BLS, “For both surveys, the data for a given month relate to a particular week or pay period. In the household survey, the reference period is generally the calendar week that contains the 12th day of the month. In the establishment survey, the reference period is the pay period including the 12th, which may or may not correspond directly to the calendar week.”
Focusing on high frequency indicators, the signals point to continuing improvement in August. Real-time labour estimates produced by academics at Arizona State University and Virginia Commonwealth University showed that the most recent RPS employment rate estimate, for the week August 9-15, is 63.8%, 2.1 ppt above the estimate from early July.
Source: Bick A. and Blandin A. (2020), Real-Time Labor Market Estimates During the 2020 Coronavirus Outbreak∗
Using seasonal adjustment, real-time data from Homebase also imply an improvement compared to July. In its monthly report for August, Homebase underlined that “BLS employment levels reported this week may show a slight improvement in activity, even though the general trend has been largely flat. Nonetheless, the July to August improvement is less than the June to July improvement.”
— homebase_data (@homebase_data) September 2, 2020
Lastly, the Labor Department data also showed that employment conditions have improved a bit since mid-July with initial jobless claims falling to 1,104k in the week ending Aug. 15 (down from 1,422k in the week ending July 18).
— LiveSquawk (@LiveSquawk) September 3, 2020
Signals from monthly surveys were more disappointing. ADP reported Wednesday that private payrolls increased by just 428,000, well below the Bloomberg consensus of 1.0 million, but above prior figure of 212,000 in July. Separately, the two ISM surveys (Manufacturing and Services) showed that the employment component remained in contraction territory (below the expansion threshold of 50) in August, respectively at 46.4 (v 44.3 prior) and 47.9 (v 42.1 prior).
Finally, looking at specific factors, in a recent post, Bill McBride highlighted that the Census Bureau released an update on 2020 Census Paid Temporary Workers, which suggests that the employment report will be artificially boosted by Census workers (+237.8k) in August.
— Bill McBride (@calculatedrisk) August 25, 2020
However, back-to-school-related hiring usually begins in August. In this context, issues concerning the return to schools may start to impact hiring. Therefore, the previous statistical boost from public-sector education observed in July report (local government education: +215k & state government education: +30k) will normalize and even reverse in August.
To summarize, high frequency and monthly indicators suggest that nonfarm payrolls kept rising in August but at slower pace than in July (1,763k). In addition, the statistical boost from public-sector education observed in July report is likely to reverse in August. Therefore, it seems that risks associated to the Bloomberg consensus forecast of +1,350ke look skewed to the downside, especially in a context where Donald Trump didn’t talk about better upcoming employment figures this week (like he did last month).