U.S. labor market conditions may tighten further in September

Since the beginning of the 21st Century, the U.S. BLS has generally underestimated the change in nonfarm payrolls in August only to post upward adjustments in subsequent reports. Since 2001, first-closing revisions have averaged 37K, while the mean cumulative adjustment posted with the October release has been a hefty 65K. Some have pointed to outsized seasonality in the data provided by respondents to the BLS' preliminary August canvasses as the culprit. If that is indeed the case, the 173K jobs added last month could be pushed markedly higher with the September release, says Societe Generale.

At 69.9%, the response rate to the initial August survey was well below the 73.6% average of the prior five years. Using a statistical model's in-sample estimates, August's payroll is found to increase by a whopping 74K to 247K, while the currently reported 245K July gain is pared by a comparatively modest 18K to 245K, estimates SocGen. 

The BLS' household survey of the country 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%, foresees SocGen.