US labor market conditions expected to tighten further in September

Government statisticians are expected to report that payroll employment growth reaccelerated, while civilian joblessness dipped to yet a new cyclical low in September. The average number of persons filing initial claims for unemployment insurance was little changed at 273K over the four weeks leading up to the September establishment survey, suggesting that the pace "pink slipping" remained quite low. Consistent with a pickup in the previously unemployed finding jobs, the number of persons on regular state benefits contracted by 24K to a four-month low of 2.24 million during the period ended September 12. Warmer-than-normal temperatures, combined with continued arid conditions across the continental US, are expected to provide a lift to hiring in a variety of industries this month.

The BLS' household survey is expected to echo the positive tone of the nonfarm payroll report. Assuming that the recent relationship between the establishment and household employment measures held steady during the reference period, the latter series likely expanded by 200K in September, marginally eclipsing the 196K persons who found work in August. The civilian labor force probably remained on a saw-toothed path during the reference period, with an estimated 90K additional persons seeking work, following the 41K prior-period contraction. 

Taken together, the aforementioned increases would leave the unemployment rate one tick lower at 5.0% (5.039% unrounded) - the lowest level since April 2008. Looking ahead, labor-market conditions are expected to tighten further during the fall quarter, paring the unemployment rate to 4.9%. Broader labor slack gauges are expected to show further improvement as well this month. 

"Our conventional unemployment rate forecast would be consistent with the BLS' U-6 measure, which includes both marginally attached workers and those working part-time for economic reasons, dipping to 10.2% - the tightest reading since June 2008", says Societe Generale.

With the civilian population expected to expand by 230K in September, the participation rate would shed one tick to 62.5% -- the lowest reading since October 1977.

"We continue to expect ever-tightening labor market conditions to propel the annual growth of private hourly earnings to 2.4% by Q4 and to 2.9% by the end of 2016", added Societe Generale.