“Fluke.” ”Volatile.” “Statistical blip.” ”Subject to revision.”
Those were the words that economists turned to as they described today’s August report on U.S. employment.
Payrolls climbed by 142,000 workers, less than the 230,000 median forecast of economists surveyed by Bloomberg and the smallest gain this year, data from the Labor Department showed today. The unemployment rate fell to 6.1 percent from 6.2 percent in July as people left the workforce.
Some are chalking up the miss to the tendency for August jobs numbers to initially come in low, only to show stronger gains as the figures are adjusted over the following months. Payrolls for the month have been revised up in each of the past four years, data show.
During this recovery, “the first report has come in low, and it’s been revised substantially upward,” said Robert Stein, deputy chief economist at First Trust Portfolios LP in Wheaton, Illinois, and the top-ranked payrolls forecaster over the last two years, according to data compiled by Bloomberg. “This is a complete statistical blip, and it will be revised upward over the next couple of months.”
Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, said his below-consensus forecast for job gains of 195,000 “reflected the apparent tendency in recent years for August gains in particular to be under-reported initially, only to be revised up later,” he wrote in a note to clients. “We do not believe the trend has weakened and caution against extrapolating.”
After revisions, payrolls were boosted by 55,000 on average for the month of August from 2010 through 2013, according to Bloomberg calculations.
Estimates for payrolls last month in the Bloomberg survey of 91 economists ranged from increases of 190,000 to 310,000 after a previously reported 209,000 July gain. The August advance interrupted six straight months of payroll gains exceeding 200,000. Revisions to prior reports subtracted a total of 28,000 jobs from overall payrolls in the previous two months.
Today’s data were particularly surprising in light of recent reports, said Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. Initial jobless claims have been hovering near historical lows, with the total number of people on benefit rolls falling last month to the lowest level since June 2007, a Labor Department report showed yesterday.
Magnitude of Miss
“I’m not one to say that a data point is totally meaningless, but the magnitude of the miss given all the other indicators this month seems a little bit large,” Lebas said in an interview. Jobs numbers “have been slowing for four months now, though it’s worth noting that, historically, August payrolls have been more subject to revision than other months,” he also wrote in a note to clients.
Still, August hasn’t been the most adjusted month over the past four years -- October employment has been revised up by an average 70,000 jobs from 2010-2013, according to Bloomberg calculations.
Even so, economists are also looking at recent string of strong economic data as reason for pause about the jobs figure. For example, the Institute for Supply Management’s manufacturing index unexpectedly climbed to 59, the highest level since March 2011, from July’s 57.1, with the orders gauge at its strongest in a decade.
Meanwhile, service providers such as retailers and construction firms expanded in August at the fastest pace since August 2006, with ISM’s non-manufacturing index climbing to 59.6. Households are also feeling better, as Bloomberg’s weekly measure of consumer sentiment rose to the second-highest level in a year last week.
“Consumers themselves have said the employment situation is improving, not deteriorating, so this would lead you to believe that this number is going to be revised by quite a bit going forward,” said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago. “The shortfall in payrolls is disappointing, but it sure looks like a fluke, not a trend.”
The report might also reflect swings that sometimes occur as auto plants close to retool equipment for the new model year, said Eric Green, head of U.S. rates and economic research at TD Securities USA LLC in New York.
“The August payroll data is notoriously volatile owing to summer-related seasonality issues, of which the auto sector shutdowns are but one example,” Green wrote in a note after the report. “None of this means that this number cannot be an honest representation of growth metrics. It simply means that one bad number in the context of normal volatility does not meet those standards.”
Work stoppages last month related to the decades-long feud among members of the family that controls Market Basket, a closely held New England grocer, also contributed to the weak employment reading. Payrolls at food and beverage stores, a component of the retail category, dropped by 17,100 workers in August, the biggest decline since November 2003, today’s report showed.
The worker protests at Market Basket did have an impact on the payroll count, although the extent of the influence can’t be determined, Laura Kelter, an economist at the Bureau of Labor Statistics, said in an interview. She said the department couldn’t say whether Market Basket was included in the survey sample.
The resolution of the dispute could add about 30,000 jobs to the September payroll count, according to an estimate by Doug Handler, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. He and other economists are awaiting additional data before downgrading the labor market recovery.
The payrolls data are “slightly disappointing relative to the last several months and a little bit of a slowdown in job growth, but I think one shouldn’t put too much weight on a single month’s numbers,” said Lawrence Katz, an economics professor at Harvard University in Cambridge, Massachusetts. “Big picture, we continue to see some progress and improvement in the labor market.”