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(CEP News) - Labour reports for August were consistently weak and signal an eighth month of net losses in the U.S. jobs market, economists say. The consensus is looking for the nonfarm payrolls report from the Bureau of Labor Statistics to show a decline of 75k jobs in Friday's report, but many say that a 100k loss wouldn't be a surprise.
Net losses to date this year have totalled 463k in the jobs market. In the past three months, the average decline has been 50k, much lower than the first three months of the year. However, although such losses are representative of a slowing economy, they are not historically consistent with a broad recession, economists say. The weekly jobless claims reports have been less helpful than usual in forecasting the payrolls figure this month, due to new regulations making it easier to file a claim, which has placed an upward bias in the numbers. Economists agree that the extent of the bias is unknown, but with claims well above 400k for five weeks now, the employment outlook is grim at best. Moreover, though the ADP private employment report released on Thursday came in line with expectations by posting a loss of 33k jobs in August, economists largely ignored the figures due to the ADP's failure to accurately predict the payrolls survey in the last three quarters. Joel Prakken, chairman of Macroeconomic Advisers and spokesperson for the ADP report, said that taking the ADP figure with the consensus estimate for the payrolls report gives a figure of about -40k, which should be a good estimate for Friday's report. He said such a figure would represent a moderate decline consistent with an economy that's rolling slowly, but is not quite in recession, adding that labour losses during recessions are measured in hundreds of thousands, not tens of thousands. Other economists are less optimistic, however. Expectations for the payrolls report range from a loss of 30k to as large as 150k. Ray Stone, economist at Stone & McCarthy, is forecasting a 60k decline in August, but notes that earlier reports this month have been more negative than the consensus. He said a triple-digit loss is "certainly possible." The unemployment rate, which has risen from 5.0% in April to 5.7% in July, is expected to remain at the latter rate in August, though forecasts from the 76 economists surveyed vary from 5.5% to 5.9%. Stone said the general direction in the unemployment rate is upward, but that some of the recent increases have been from "a poor summer job market for teenagers," which will come to a close in the fall. According to the BLS, the average rate of unemployment for 16- to 19-year-olds from May to July was 19.0%, compared with an average of 15.7% for the same period in 2007. Relying on econometric models, senior U.S. economist Paul Ashworth from Capital Economics said the payrolls report should fall by 80k in August, while the unemployment rate should push up to 5.9%. He noted the employment component of the ISM non-manufacturing index slipped back to 45.4 in August, a level consistent with triple-digit losses, while jobless claims also rose, pushing the four-week average to 438k. On the market reaction, George Adell, fixed income strategist at Commerce Capital Markets, said markets are expecting a lot of weakness in the report, so a bigger move will occur if it comes in better than consensus. As for how the Fed might react, Scott Brown, chief economist at Raymond James & Associates, said a weakening labour market "could eventually lead the Fed to cut rates, especially if energy prices continue to roll back." His forecast for a 90k drop is more pessimistic than consensus, and he said he "wouldn't be shocked" to see a loss greater than 100k. By contrast, Adell said a weak release won't cause the Fed to rethink the 2% target rate. "I don't think there is a magic number that will trigger the Fed to lower interest rates. They are already expecting the unemployment rate to peak at 6.0% and employment is a lagging indicator so there won't be anything new for the Fed," he said. By Patrick McGee,
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