(Bloomberg Business) — The stakes couldn’t be higher for the August employment report, even though the month has typically been cursed by disappointment.
For Federal Reserve officials, who are trying to gauge the U.S. economy’s prospects as they consider raising interest rates in less than two weeks, have already been thrown a curve ball — global economic malaise and reeling financial markets.
The final monthly report on the American job market before the Fed’s September policy meeting has the potential to muddy the waters even more. Economists have overestimated the August payroll prints over the past four years by an average of about 50,000.
Here’s what economists and Fed watchers are looking for when the numbers are released at 8:30 a.m. Friday in Washington.
The headline figure, derived from a survey of employers, has been fairly solid in 2015, even in the face of inconsistent first-half economic data. Job gains averaged 211,000 through July after 260,000 a month in 2014, the best year for American hiring since 1999.
While economists are calling for an advance of about 220,000, according to the Bloomberg survey median, history shows they don’t have a very good handle on August. From 2005 to 2014, forecasters have over-estimated the initial August payrolls print seven times, including in each of the past four years. What’s more, the Labor Department (excluding annual and benchmark revisions) has marked up its first estimate in subsequent months in eight of the past 10 years.
Such a trend could complicate the Federal Open Market Committee’s reading of the labor market and readiness to lift off from near-zero interest rates.
“If we’re aware of this `quirk’ in the August data, rest assured the data-dependent FOMC is also aware of it,” said Richard Moody, chief economist at Regions Financial Corp. ”But, really, `Just wait – that August employment number will be revised higher’ wouldn’t necessarily be the best way to get already-antsy financial markets to come to terms with a funds- rate hike.”