Tonight’s US non-farm payrolls for September is a crucial report given the expectation for a near-term rate hike from the US Federal Reserve’s FOMC in either October or December. We decided to chart a few key metrics that make up the payrolls and household surveys, and look ahead to what is expected to arrive this evening.
Non-farm payrolls have increased for the past 59 months, the longest continuous stretch of hiring on record. Over the past year payrolls have risen by 2,919,000. Although high, it has been slowing for the past four months. In September payrolls are tipped to increase by 203,000. Also keep an eye out on revisions to the payrolls figure for August, previously reported as an increase of 173,000. It is a month that’s traditionally seen big upward revisions over the past five years.
In August the unemployment rate dipped to 5.1%, the lowest level since April 2008. The underemployment rate, combining unemployed and underutilised workers, dipped to 10.3%, a level last seen in June 2008. In September, the unemployment rate is expected to hold steady at 5.1%.
Average hourly earnings growth is seen by some to be the most important component of this evening’s report given its implications for inflation expectations. In August average hourly earnings jumped by 0.3% leaving the annual rate of growth at 2.2%. From mid 2011 through to August 2015, the annual rate has ranged between 1.5% to 2.3%. In September earnings are tipped to increase 0.5%, something that would leave the annual rate at 2.4% if realised.
Although solid employment growth has contributed to the drop in unemployment, falling labour market participation has also played a role. Over the past three months participation has held steady at 62.6%, the lowest level seen since 1978.
One factor contributing to the fall in participation is elevated number of discouraged workers, those that have left the labour force because they cannot find work. While monthly numbers have been steadily falling since 2010, they remain elevated compared to the pre financial crisis period.
The September payrolls report will be released at 10.30pm AEST.