U.S. August ADP Employment - Trend now below 100k per month, Initial claims rise

We are forecasting a 65k increase in August’s non-farm payroll, with a 70k rise in the private sector, slightly stronger than the ADP estimate but a fairly small difference compared with the usual divergences between the surveys.

The ADP detail shows most of the growth coming from a 50k rise in leisure and hospitality. Construction was also quite firm with a rise of 16k. Weakness was seen in trade transportation and utilities, down by 17k, and education and health, down by 12k. The latter sector has led most recent non-farm payroll growth and we doubt it will be as weak in the non-farm payroll detail.

Yr/yr growth in wages of 4.4% for job stayers was unchanged from July while a 7.1% yr/yr rise for job changers was up from 7.0% in July.

Weekly initial claims at 237k are the highest since June 13 and up from 229k with the 4-week average of 231k the highest since July 5. This covers the week two weeks after August’s non-farm payroll was surveyed.

Initial claims picked up in May and June when payroll growth after revisions was minimal, then slipped in July when payroll growth, while subdued, was stronger than the downwardly revised May and June data. The 4-week initial claims average in August’s survey week was lower than in July’s but trend seems to be picking up again, a negative sign for September if not August payrolls.

Continued claims, which cover the week before initial claims, are a little more encouraging, down 4k to 1.940m, with the 4-week average, which increased in May and June, having subsequently stabilized. This is consistent with slow growth in employment, but not a sharp rise in unemployment. Weaker immigration is curbing growth in the labor force.