Preview: Why August non-farm payrolls frequently disappoint

• Consensus estimate +160K versus +175K prior (range +100K to +246K)
• July was +114K
• Private consensus +139K versus +148K prior
• Unemployment rate consensus estimate 4.2% versus 4.3% prior
• Prior participation rate 62.6%
• Prior underemployment U6 7.8% v
• Avg hourly earnings y/y exp +3.7% versus +3.7% prior
• Avg hourly earnings m/m exp +0.3% versus +0.3% prior
• Avg weekly hours exp 34.3 versus 34.2 prior

Numbers released so far this month:

• ADP report +99K versus +122K prior — this was a three-and-a-half year low
• ISM services employment 50.2 vs 51.1 prior (weak but first back-to-back reading above 50 since late-2023)
• ISM manufacturing employment 46.0 versus 43.4 prior
• Challenger job cuts 75,891 versus 25,885K prior — highest since 2009 (excluding 2020 pandemic)
• Philly employment -5.7 versus +15.2 prior
• Empire employment -6.7 versus -7.9 prior
• Initial jobless claims survey week 233K versus 245K prior

There is a seasonal quirk in the August non-farm payrolls report: it’s missed before revisions in 17 of the past 23 years to the downside. Notably, though, the BLS may be improving their seasonal adjustment methods as it was higher than expected that past two years, though only by 15K and 17K, respectively. Going over 20 years, there is a 70-30 split on downside misses.

Another thing to note is that the disappointing July jobs report may have been skewed lower by Hurricane Beryl and we could get some payback this month.

The key currency pair to watch on the release is USD/JPY, which has fallen for three straight days into the release and is basically flat on the year, erasing a gain of 20 big figures. With two-year yields now at 17-month lows, the downside pressure is building.

This article was written by Adam Button at www.forexlive.com.