On Friday, we’ll find out how many jobs the US economy added in September.
But this jobs report is really about August.
Last month, the Bureau of Labour Statistics reported that the economy added 173,000 jobs. That was below Wall Street’s expectation for 217,000.
A weak number was somewhat expected. Via Deutsche Bank’s Joe LaVorgna, we noted before the last jobs report that nonfarm payrolls in August historically tend to first be revised higher after the fact.
In a note to clients on Wednesday, Societe Generale’s Brian Jones wrote that the August revision will be just as important for market participants as the September print. And, if history repeats itself, it would be revised higher.
He wrote (emphasis added):
“Since the beginning of the 21st Century, the BLS has generally underestimated the change in nonfarm payrolls in August only to post upward adjustments in subsequent reports. Since 2001, first-closing revisions have averaged 37,000, while the mean cumulative adjustment posted with the October release has been a hefty 65,000 (see chart below). Some have pointed to outsized seasonality in the data provided by respondents to the BLS’ preliminary August canvasses as the culprit. If that is indeed the case, the 173,000 jobs added last month could be pushed markedly higher with the September release.
At 69.9%, the response rate to the initial August survey was well below the 73.6% average of the prior five years. Using our statistical model’s in-sample estimates as guides, we would not be surprised to see August’s payroll increase boosted by a whopping 74,000 to 247,000, while the currently reported July gain is pared by a comparatively modest 18,000 to 227,000.”
For September, Wall Street is expecting nonfarm payrolls growth of 200,000, with the unemployment rate unchanged at a seven-year low of 5.1%, according to Bloomberg. Jones’ forecast is above consensus, at 225,000.
The chart below shows that for over a decade, August nonfarm payrolls have been revised upwards most of the time.