The labor market is expected to continue to lose steam in September, with the total change in employment likely increasing by 115,000 jobs on the month, and the unemployment rate likely rising to 3.8%. Given the slowdown in domestic manufacturing activity and goods production, we note there is downside risk to our top line forecast when the report is released on Friday; the uncertainty linked to the direction of trade policy may exact a larger price on hiring across goods producing and manufacturing jobs than our model implies. Beneath the headline, we expect a gain of 0.3% in average hourly earnings on the month, and 3.2% on a year-ago basis. There may also be a possible downward revision to the August estimate of an increase of 130,000 jobs.
We do not anticipate a large increase in census hiring on the month, nor do we expect the General Motors strike to influence the estimate on manufacturing or on the top-line number. Since the strike started on Sept. 16, and the Bureau of Labor Statistics reference week for the month of September ended on Sept. 14, the strike should not be reflected in the monthly labor count. If the work stoppage continues through the October reference week (ending Oct. 12), forward-looking investors and policymakers will observe the impact of the strike in the October employment report on the first Friday in November.
For the past several months, hiring in the education and health care ecosystems has supported overall service hiring. We expect that to slow, which will create conditions for a second straight month of total private sector hiring below 100,000 jobs in September. The notable slowdown in the ISM manufacturing employment sub index to 46.3, and new export orders to 41, denotes some risk to the overall monthly estimate due to weakness in goods production, manufacturing, trade and transport ecosystems