Wednesday, October 2, 2019

Expect a weak report for the leading jobs sectors on Friday

 - by New Deal democrat

September motor vehicle sales will be reported later today, after the domestic US manufacturers post their numbers. Sales of all other vehicles were down -13% YoY, but that is without seasonal adjustment including for Labor Day, so the seasonally adjusted sales might tell a completely different story.

In the meantime, with an eye towards Friday’s jobs report, let’s take a look at what is happening with temporary help services, one of the most leading components of employment.

Every week I update the American Staffing Index, (from which site the first four graphs below are taken) which has a 14 year history and in that time has correlated pretty well with the final temp help employment numbers. This year it has turned increasingly negative, and this week had the most negative YoY reading so far, down -5.45% YoY for the single week, and off -4.9% YoY as a 4 week moving average:

Maybe the best way to see how bad this is, is this non-seasonally adjusted look at the index’s entire history:

Note how the index typically rises over the course of the year until plunging right after the Christmas and New Year’s holidays — but this year has barely risen at all, the worst performance since its 2008 plunge during the Great Recession.

Let’s also compare this year with several other years during this expansion that have been relatively week. First, here’s 2016-17:

And here’s 2011-12:

This year is a little weaker than 2011, and not quite as weak as mid-2012. It’s also pretty close to the middle portion of 2016 and the first 6 months of 2017.

Now let’s look at temporary jobs, averaged quarterly, from the jobs reports from 2011 to the present:

Although there will still gains, there was a big downshift in 2012, outright losses in early 2016, and continuing weakness, albeit with gains, through 2017. There have been losses in both Q1 and Q2 of this year.

As I reported a few weeks ago, the pattern has been for temp jobs to “surprisingly” increase in the initial jobs report, only to be revised significantly downward over the next two months. Last month August’s gain was initially reported at +15,400.

If Friday’s report runs true to form, there will be “surprising” gains in temp jobs, but a big downward revision to August’s number. I fully expect that the final, combined number for August and September will be negative.

The other two leading jobs sectors are residential construction and manufacturing. Residential construction has picked up, so that number is likely to be positive, but the ISM manufacturing report’s employment subindex showed contraction for the second month in a row. 

The bottom line is, I expect continued weakness in the leading sectors of the jobs report on Friday.