Friday's August Employment Report may very well come in weaker than consensus expects, but it will probably not completely close the door on a September Fed rate hike -- as it is not clear whether they will be weaker than the possibly low bars set by the Fed. Nevertheless, weaker-than-expected prints for Payrolls and Average Hourly Earnings could boost stocks and bonds and weigh on the dollar. Here is some evidence that Payrolls and Average Hourly Earnings will come in weaker than expected.
Payrolls
1. Payrolls came in below the ADP Estimate in August in each of the past 3 years (since ADP changed its estimation procedures). The average shortfall is 48k, with a range of 24k to 70k.
August Print (000s)
ADP Estimate First-Print Private Payrolls
2016 177 na
2015 190 140
2014 204 134
2013 176 152
2. Some Street Economists point out that consensus has overestimated August Payrolls in each of the past 5 years. Consensus is +180k.
a. This pattern of consensus miss has tended to be an unreliable predictor, however.
3. The August Payroll Survey Week was relatively early this year, after a late July week. This early timing would seem to risk a downward bias to the m/m change in jobs.
a. But, BLS seasonal adjustment should account for this calendar timing, and there is no conclusive evidence that this early survey week
will bias down an August Payroll gain.
Average Hourly Earnings
1. Average Hourly Earnings should print 0.0-0.1% m/m, as a result of a calendar quirk.
a. This quirk was likely responsible for the 0.3% m/m jump in July Average Hourly Earnings.
2. The y/y would fall to 2.3-2.4% from 2.6% in July. This would be the lowest y/y since November 2015.
3. Consensus for Average Hourly Earnings is +0.2% m/m.
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