July Employment Preview

On Friday at 8:30 AM ET, the BLS will release the employment report for July. The consensus is for 184,000 jobs added, and for the unemployment rate to be unchanged at 3.6%.

There were 209,000 jobs added in June, and the unemployment rate was at 3.6%.

From BofA economists:”For the July employment report, we expect nonfarm payroll employment increased by 200k, little changed from the 209k gain in June. … We expect the unemployment rate to hold at 3.6%.”From Goldman Sachs following the strong ADP report: “[The] ADP report was consistent with the strong pace of July hiring suggested by other alternative employment indicators. We left our nonfarm payroll forecast unchanged at an above-consensus +250k ahead of Friday’s release.”• ADP Report: The ADP employment report showed 324,000 private sector jobs were added in July. This suggests job gains well above consensus expectations, however, in general, ADP hasn’t been very useful in forecasting the BLS report.

• ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires). The ISM® manufacturing employment index decreased in July to 44.4%, down from 48.1% last month. This would suggest about 50,000 jobs lost in manufacturing. The ADP report indicated 36,000 manufacturing jobs lost in July.

The ISM® services employment index decreased in July to 50.7%, up from 53.1% last month. This would suggest about 90,000 jobs added in the service sector. Combined this suggests job gains of 40,000, well below consensus expectations.

• Unemployment Claims: The weekly claims report showed a sharp increase in the number of initial unemployment claims during the reference week (includes the 12th of the month) from 265,000 in June to 228,000 in July. This suggests more layoffs in July than in June.

• COVID: As far as the pandemic, the number of patients hospitalized during the reference week in July was around 5,700, down from 6,400 in June.

• Conclusion: Most of the key indicators suggest another solid employment report in July (the ISM surveys suggest some weakness). We’ve seen an upside surprise in employment almost every month, however someday we will see a downside surprise.