“For Reasons That Aren’t Clear,” August Payrolls Usually Disappoint

in Economy by

We’ve talked steadily about this Friday’s NFP number this week because… well… because unless you want to talk about EpiPens (which we really don’t), there’s not much else to talk about.

There’s oil, but we all know what that depends on: nascent talks of a production freeze that seems just as unlikely now as it did earlier this year in Doha thanks to a recalcitrant Iran which is hell-bent on frustrating its Sunni regional allies by seizing more market share. Here’s Brent versus Iranian production:


(Chart: Bloomberg)

Besides, the fate of oil to a certain extent hangs on Friday’s report. If the BLS knocks it out of the park with something like the 215K print BNP is expecting, then you bet the dollar will continue to move higher pressuring the entire commodities complex.

For their part, Citi has hinted at a disappointing number with the August NFP dot plot we showed you on Monday.



Out today with his forecast is the Street’s favorite “weatherman” Deutsche Bank’s Joseph LaVorgna who is confused as to why August seems to always be a bummer. Here’s an excerpt:

“For reasons that are not entirely clear, August payrolls tend to surprise the market to the downside. Our best guess is that this is due to difficulties with seasonal
adjustment factors. Case in point, the initially-reported August nonfarm payroll gains for each of the last five years have disappointed median consensus estimates by an average of 52k. Over the last dozen years, August nonfarm payrolls have surprised to the downside nine times, by an average of 46k. For this reason, we have tempered our August payroll projections relative to the consensus forecasts of 180k for both headline and private-sector job gains. Our employment estimate is also consistent with one Fed rate hike this year, which, in our view, is more likely to come in December, once we get through the US Presidential Election.”

Perfect. So there’s your setup just as we said earlier, that just gives the Fed an excuse to wait until after the election. Deutsche’s forecast: 150K. And as the bank would like to remind you, “Despite the 250k-plus gains in employment over the last two months, the underlying pace of job growth is slowing. As Figure 1 illustrates, the 12-month moving average of nonfarm payroll gains is currently 204k, which compares to 206k in June and a cyclical peak of 262k in February 2015.”


(Chart: Deutsche Bank)

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