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Jobs & Jobless Claims Continue Historic Run

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Thursday, September 6, 2018

Ahead of Thursday’s opening bell we see plenty of grist for the economic mill: new ADP (ADP - Free Report) private sector payrolls, productivity and labor cost updates and, as most every Thursday morning, new initial and continuing jobless claims. These releases come out ahead of the all-important non-farm Bureau of Labor Statistics (BLS) report due this time tomorrow.

Starting with the latest ADP survey for August, private sector jobs grew 163K for the month. This is a bit below expectations, but still roughly double the jobs “needed” to make up for new retirees every month. The July headline was revised downward to 217K by 2000 jobs, but still — these numbers are nothing to sneeze at. Indeed, they continue the narrative that we have historically robust employment in the U.S. currently.

Services, of course, outperformed Goods — 139K to 24K — but the 19K new jobs in Manufacturing remained strong, which has been a hallmark of the “Trump economy” thus far. Education/Healthcare jobs, as per the norm, topped the list with 31K new job fills, followed by Leisure/Hospitality at 25K and Trade/Transportation at 21K. This last number is interesting in that we do not yet see any meaningful pullback in employment for companies expected to feel the effects of trade war tensions.

Medium-sized companies (between 50-499 employees) grew by far the biggest with 111K new job adds last month. By contrast, small companies brought 21K positions — plausibly due to difficulties in hiring enough employees with suitable skill-sets, which we’ve heard about for months — and large firms filled 31K new openings. Medium-sized companies have outperformed the other two designations for much of the past two years, but last month they carried even a larger load of the gains.

Tomorrow’s BLS headline — including new private sector and government jobs — is expected to be around 190K, which has been the basic standard for the past several months, and Unemployment sinking to 3.8%. With the ADP number coming in a little light, perhaps we’ll see some downward revisions before tomorrow morning, though we don’t expect much significance here. The ADP and BLS aren’t often in real-time lockstep, but over later revisions we tend to see their results align.

Initial Jobless Claims Sink to Nearly 200K

Clearly within a low range thought unattainable (or at least unsustainable) just a couple short years ago, weekly jobless claims continue to find lower lows than we’ve seen in about half a century. Last week’s 203K is the lowest documented weekly claims result since December, 1969 (this survey began in 1967). The previous week’s 213K offered no revision this morning.

Continuing Claims ticked lower as well: to 1.707 million from the 1.71 million the previous week — again, as stellar of a headline as any of us is likely to recall in weekly unemployment metrics. Can initial claims go sub-200K and continuing reach sub 1.7 million next week?

Productivity & Labor Costs Also Stellar

Finally, Non-Farm Productivity matched its mid-month read of 2.9% growth in Q2 2018. Output rose 5% and hours worked also grew, by 2%. This is another BLS report, which will help analysts hedge what they expect to see in non-farm payrolls tomorrow. Manufacturing grew 1.5% in Q2, which may help bolster employment figures for August.

Unit Labor Costs went down 1%, conversely, lower than the mid-month read of -0.9%. This may also manifest itself in tomorrow’s report in the wage growth by-line, which has been the sole notable negative of the recent historically strong domestic labor market. Economically, productivity going up and costs going down are unarguably agreeable. These types of reads will also keep the Fed from raising interest rates too aggressively. But the U.S. workforce may still be feeling pain relative to market participants, and this looks likely to continue at least into tomorrow’s read.

Mark Vickery
Senior Editor

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