FOREX

The September employment report is scheduled for publication on October 5. Nonfarm payrolls are predicted to have risen 75,000 in September after a loss of 4,000 jobs in August. The consensus forecast is a more bullish gain of 115,000 jobs in September. The unemployment rate is expected to edge up to 4.7% from 4.6% in August. During the three months ended August, nonfarm payroll rose at an average pace of 44,000 compared with a 147,000 monthly gain in employment during the January ??“ May period and an average of 186,000 jobs per month in 2006. On a year-to-year basis, nonfarm payrolls rose 1.17% in August, the lowest since April 2004.

Recent survey data about employment conditions present a mixed picture. The September employment report should help to sort it out. The ISM manufacturing and non-manufacturing surveys for September point to an increase in hiring. The ISM manufacturing employment index rose to 51.7 in September from 51.3 in the prior month. This gain is a little suspect because manufacturing employment has dropped every month since July 2006 inclusive of a 46,000 drop in August.

The employment index of the non-manufacturing ISM survey shot up to 52.7 in September from 47.9 in the prior month. Service sector employment grew 1.59% on a year-to-year basis in August, the smallest increase since May 2005 (see chart 1). The sharp increase in the non-manufacturing employment index is probably exaggerating the underlying conditions given the likely layoffs following the credit crunch.

The Challenger report shows a sharp increase in layoffs in the financial sector in August and September (see chart 4).

However, financial sector payrolls in August (see chart 5) were steady.

The ADP private sector employment tally (see chart 6), which closely tracks private sector payroll employment of the Labor Department, rose 58,000 in September after a gain of 27,000 in August.

Weekly jobless claims numbers are currently distorted by faulty seasonal factors. The September employment report is important more than on other occasions because it should establish whether the Fed will stay put or lower the federal funds rate at the October 30-31 FOMC meeting.