August Job Revisions Could Give Fed Wrong Idea About Employment

The U.S. government has initially underestimated job growth for almost every August over the last decade, a trend that could make it harder for the Federal Reserve to decide if an upcoming employment report will signal America is ready for a rate hike.

The Fed said in July it needs to see “some” further improvement in the labor market before raising rates. The Labor Department’s jobs report for August, which will be released on Friday, will be the last monthly employment report before the Fed’s Sept. 16-17 policy review.

But like many economic indicators, it is subject to revisions as employers turn in questionnaires late and government statisticians re-estimate seasonal swings in the data.

Between 2005 and 2014, August was the month with the lowest first estimate for job growth relative to revisions that were published in the employment reports for the subsequent two months, a Reuters analysis found.

Over that period, on average the government found 58,000 more jobs added to payrolls in August than initially figured. Job growth in August was revised lower only in 2005 and 2008.

For this Friday, the number that market participants and economists are looking for is 220,000, roughly in line with the pace of job creation over the last few months, according to a Reuters poll. Far fewer than that and bets on a September Fed liftoff will sink fast.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza