Goldman: Here's Why Upcoming Employment Data Will Be Uglier Than Everyone Expects

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Goldman Sachs is pounding the table with their counter-consensus view that tomorrow’s employment report will be worse than the market expects:

Goldman’s Andrew Tilton:

The September employment report will be released Friday at 8:30am.  We expect a below-consensus gain of 25,000 private sector payroll jobs and an increase in the unemployment rate to 9.7%.  A variety of labour market indicators, including this morning’s weak ADP Employment Report, look consistent with this forecast.  More simply, employment growth tends to follow GDP growth with a strong correlation and a slight lag – so weak growth data in recent months also points to job growth that is as soft or softer than that seen over the summer. We expect the labour Department to announce a preliminary estimate of a small upward “benchmark revision” to payroll growth since March 2009.

Last Friday we issued our preliminary forecasts for the September employment report: a drop of 50,000 payroll jobs, composed of an increase of 25,000 private sector and a decrease of 75,000 government jobs, a rise in the unemployment rate to 9.7%, and an increase in average hourly earnings by 0.1%.  Incremental information over the past three days has not changed our views.  Most leading indicators look quite weak.

As leading indicators, they highlight that job advertising has stagnated, business surveys are mixed, jobless claims are down just because Americans exhausted their benefits, and the ADP jobs report disappointed yesterday. So prepare to be disappointed again.

Note that today we’ll have initial jobless claims data at 8:30 AM, followed by the September employment report mentioned above tomorrow.

(Via Goldman Sachs, A slow economy means a slow labour market, 7 October 2010)

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