September US Jobs Report Preview

• Consensus estimates project nonfarm payroll employment to have increased by around +160K in August, up from +114K last month (prerevision). LinkedIn data suggests some downside payroll growth compared to consensus (+155K) as the pace of hiring has slowed going into the summer. Unemployment is expected to tick down to 4.2%.
• Hiring, quits, and claims have all shown deterioration this summer but not enough to undermine continued employment growth and relatively low unemployment.
• Much of the strength of labor market expansion now depends on just two sectors – Healthcare and Social Assistance and Government, resulting in a fragile expansion facing headwinds from the lagging impact of tighter monetary policy.

Nonfarm Payroll Employment

The labor market continues to post softer figures around hiring, separations, unemployment, and employment growth as we enter the back half of 2024. Some of this additional slowdown is likely driven by the delayed effects of past hikes and revisions around when monetary policy will loosen and by what amount.

Consensus estimates project a nonfarm payroll increase of around +160K this coming Friday, up from July’s well below consensus increase of +114K. LinkedIn data suggests below consensus payroll growth (+155K) as the pace of hiring has slowed over the summer.

These projections suggest that employment growth took a clear step down this summer from a solid clip (with the 3-month average of employment growth roughly fluctuating between 130K and 230K since October 2022, crudely applying August’s preliminary benchmark revisions to current estimates) to a much more tepid clip. Regardless of the exact level of expansion, we see clear signs of slowdown this summer.

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Friday’s payroll print will again hinge on what happens in just a few sectors. Before applying August’s preliminary benchmark revisions, Government, Healthcare and Social Assistance, and Leisure and Hospitality accounted for nearly two-thirds of nonfarm payroll gains this year. Crudely applying those revisions, payroll gains skew even more to these three sectors. A collapse in gains in Local Government and Leisure and Hospitality contributed heavily to April’s slowdown in payroll expansion, and ongoing gains in Government and Healthcare and Social Assistance prevented a complete collapse in gains in July.

Looking at today’s Job Openings and Labor Turnover Survey (“JOLTS”) report, we see some evidence for the potential of ongoing expansion in these three sectors at a slower pace, resulting in more muted nonpayroll payroll employment gains.

Leisure and Hospitality

Today’s JOLTS report indicates no change in openings in Leisure and Hospitality by the end of July with a slight decrease in openings in Accommodation and Food Services which makes up the bulk of Leisure and Hospitality. The pace of hiring in Accommodation and Food Services slowed in July according to the LinkedIn Hiring Rate but rebounded from a year-to-date low in June. And though weaker in recent reports, ADP’s employment report continues to show expansion for the Leisure and Hospitality sector. Overall, this sector looks to have recovered its employment losses from the pandemic and looks unlikely to be as strong a contributor to payroll gains in the near term.

Government

The BLS reported a decrease in openings at the State and Local Government levels from June to July while July’s LinkedIn Hiring Rate for Government slid in July compared to June. Along with weaker hiring gains in JOLTS and fewer nonpayroll payroll additions, Government also looks poised to contribute fewer jobs to future payroll gains.

Healthcare

Healthcare and Social Assistance continues to post solid payroll gains as it has done over the past year. Neither LinkedIn data nor JOLTS data show any meaningful acceleration or deterioration for this sector. Healthcare and Social Assistance looks poised to continue to be the largest and most robust contributor to payroll gains in the near term and the long term.

Unemployment and Labor Force Participation

The unemployment rate is expected to tick down to 4.2%. Claims data has held steady in August after an upward turn in June and July, signaling decreased upside to joblessness.

The BLS’ household survey continues to be downbeat this year, showing tepid employment gains to date in 2024.

Labor force participation for workers aged 25 to 54 sits at the highest level since the late 90s and seen a pickup since the spring. This labor force growth further support wage growth moderation even though it wages may no longer be considered a key driver of price inflation by the Federal Reserve.

Data Roundup

Today’s Job Openings and Labor Turnover Survey (JOLTS) and LinkedIn data suggest that the overall labor market is holding up but potentially weaker than consensus expectations suggest.

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• With the exception of job openings, this week’s JOLTS report showed only slight changes from last month with a slight uptick in the quit rate and layoff rate back to May levels. The hiring rate rebounded to April’s level. Job openings skewed meaningfully to the downside, falling under 8M (to 7.6M) after revisions. Openings decreased notably in Transportation, Warehousing, and Utilities; Health and Social Assistance; and State and Local Government – the latter two of which have been key driving of payroll gains.

• Based on the LinkedIn’s National Hiring Rate, the seasonally adjusted pace of hiring has slowed going into the summer. However, hiring in the Technology, Information, and Media industry continues to exhibit outsized momentum ?with hiring accelerating 7.2% from July 2023 to July 2024, while the overall hiring rate has decelerated 7.9% over this period.

• Tomorrow’s ADP data is expected to show private payroll gains of around +140K (up from last month’s +122K).