Payrolls Preview: Goldman Says 'Beat', Fed Regional Surveys Signal 'Huge Miss'

Goldman forecasts nonfarm payroll growth of 215k in September, above consensus expectations of 200k by about 0.3 standard deviations of a typical surprise. Noting that August payrolls were likely distorted downward by seasonal bias last month and may be revised up, Goldman expects the unemployment rate to remain flat at 5.1% (and earnings growth to slow). Howver, judging by the collapse in September’s regional Fed surveys, today’s “most important” payrolls data ever could be a massive miss.

As Goldman Sachs details,
We forecast nonfarm payroll job growth of 215k in September, which would be a roughly 0.3 standard deviation surprise to consensus expectations of 200k. The employment components of business surveys were softer on net this month, but ADP surprised on the upside, reported job availability improved slightly, and government employment gains should again make an above-trend contribution.Overall, we expect a gain roughly in line with the 212k average seen so far in 2015.

Arguing for a stronger report:

Job availability. The Conference Board’s labor differential—the net percent of households reporting jobs are plentiful vs. hard to get—rose a touch further in September (+0.4pt to 0.8), confirming the large increase in August that pushed the indicator into positive territory for the first time since January 2008.

ADP report. ADP beat expectations in September, rising 200k. Construction employment grew 35k, the largest increase in over a year, but manufacturing employment fell 15k, suggesting that last month’s weakness in manufacturing payroll employment might continue.

Government employment. A mix of seasonal and fundamental factors has boosted government hiring over the last three months, with the gains coming primarily from education. We expect this recent pickup—which has increased government payroll growth about 20k above the prior trend—to persist in September but fade thereafter.