Barron’s: ”Svaga jobbsiffror kan vara goda nyheter”

När det på fredagseftermiddagen väntas nya jobbsiffror kan dåliga nyheter vara goda nyheter för investerare: Om anställningstakten är en besvikelse kan det betyda att centralbanken Federal Reserve väntar med att fasa ut sitt stödprogram ytterligare några månader. Samtidigt kan siffrorna utlösa negativa marknadsreaktioner om de är för svaga. Prognoserna är ovanligt splittrade och ekonomer är exempelvis inte ense om hur man väntar sig att lärarnas arbetsmarknad utvecklades i augusti, skriver Barron’s.

Friday’s Jobs Report Stands to Be Pivotal for Taper Timing. Here’s What to Watch.

Lisa Beilfuss, Barron's, 2 September 2021

Jobs Friday is approaching, and the stakes are higher than in recent months.

As extra unemployment pay ends for some 11 million Americans, employers, economists and central bankers alike expect to see millions of workers begin to re-enter the workforce. Employers will finally be able to fill open positions and meet customer demand, the thinking goes, in turn cooling pricing pressures that have persisted as shortages abound.

The anticipated beginning of a return-to-work wave comes amid renewed Covid-19 concerns. Economic activity has slowed as infections and hospitalizations rise, dash office reopenings, and weigh on consumer sentiment.

“The August jobs report could be pivotal for the Federal Reserve as it prepares to reduce its bond-buying program this year,” says Lydia Boussour, economist at Oxford Economics. While policy makers will likely see the report as another step toward “substantial further progress” in the labor market, she says, the slower hiring that is generally expected will reinforce the Fed’s patient approach.

As has been the case lately, bad news may remain good news in that disappointing hiring will give investors reason to believe tapering of monthly emergency bond purchases won’t come before November. That’s as long as hiring doesn’t slow too much, given that growth concerns are already swirling.

Here’s what to watch for when the numbers are released at 8:30 am ET.

Nonfarm Payrolls

This month, economists’ estimates for August nonfarm payrolls are all over the map. Predictions range from about 400,000 to 1 million, though most are somewhere between 600,000 and 850,000. The median consensus estimate according to FactSet is 750,000, down from 943,000 in July.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, says risk is to the downside. He sees a sharper-than-consensus slowdown in payroll growth due to “the clear Delta-driven wobble” in near-real-time indicators of consumers spending on discretionary services, including restaurant diner and airline passenger numbers. While he says the interruption to the upward trend in hiring is likely most pronounced in the southeastern quadrant of the country, where Delta has driven hospitalizations back to winter peaks, Shepherdson notes that restaurant diner numbers have softened even in New York, where Delta cases are quite low.

Shepherdson predicts a payrolls gain of just 400,000 but he says there is a substantial margin of error — plus or minus 300,000 — to his forecast.

At the other end of the spectrum, Cornerstone Macro’s chief economist Nancy Lazar estimates a nonfarm payrolls increase of 950,000. She expects the August report to reflect the return of workers who have already lost extended unemployment benefits, and she isn’t put off by the surprisingly weak payroll report from ADP on Wednesday.

ADP’s measure of private employment rose just 374,000 (consensus was at 625K) in August, but it has been a poor predictor of monthly payroll changes during this recovery, Lazar says. “That’s especially true now, given ADP’s use of initial unemployment claims in its model, instead of continuing claims—which capture workers whose extended benefits have expired,” she says, adding that continuing claims have fallen sharply since July’s payroll survey week.

Government Hiring Uncertainty

Economists are split over whether the hiring of teachers will boost August payrolls or drag them down. State and local governments in July added 231,000 jobs in the education sector; Shepherdson says the seasonal factors that triggered the summer surge are unlikely to show up again in the August data.

Diane Swonk, chief economist at Grant Thornton, meanwhile, says new jobs in public education likely drove employment gains in August as schools and universities scrambled to reopen. She notes that many districts reported difficulties finding workers as fear of contagion remains high, and that as retirements among teachers and support staff accelerated during the pandemic. While some schools have already reverted to online learning, Swonk says most of those closures occurred after the survey week for the August payroll data and therefore wouldn’t show up in Friday’s report.

Professional Services Padding Payrolls

Hiring at professional services firms and investment banks may provide a particular boost to August payrolls, says Swonk. “Deep pockets, cheap debt and a fear of rising taxes have prompted a tidal wave of deal activity for large and midsize firms,” meaning recruitment has intensified as many of these businesses are scrambling to pull deal-making forward before taxes potentially rise with the Biden administration’s 2022 fiscal package, she says.

Falling Unemployment

Economists polled by FactSet predict a decline in the U-3 rate of unemployment to 5.2% from 5.4% in July. It would mark another new low in the unemployment rate since the pandemic struck, though it is still higher than the half-century low of 3.5% in February 2020.

Fed Chairman Jerome Powell recently reminded investors that while the labor market is recovering at a faster-than-expected pace, officials want to see more progress before tapering asset purchases — and far more progress before lifting interest rates.

Some economists say the Fed is looking at unemployment rates of cohorts that typically experience higher rates of unemployment. In July, the Black unemployment rate was at 8.2% while the Hispanic rate stood at 6.6%. The U-6 rate of unemployment, which includes those marginally attached to the labor market and part-time workers who would rather be full time, was at 9.2%. Those three rates were 6%, 4.4% and 7%, respectively, in February 2020.

Any decline in the unemployment rate will look even better if it comes alongside a rise in labor force participation. Boussour of Oxford Economics expects the labor force participation rate, which has barely budged in a year, to have risen a modest 0.1% to 61.8% in August as rising virus fears delay the return by some to the workforce.

Higher Wages

Given that severe labor shortages seem to have persisted in August, economists anticipate another month of upward pressure on wage growth. But because coronavirus concerns appear to have affected customer demand, economists predict wage inflation didn’t heat up further from July.

Economists see a 0.4% increase in average hourly earnings from July, according to FactSet. From a year earlier, they anticipate a 3.9% rate, which would be down a tenth from a month earlier. The monthly gain will still be led by low-paid services industries as the recovery continues to lift demand for workers in those industries, Boussour says, adding that labor supply constraints should keep upward pressure on wages in the second half of 2021.