Job's: Policy over Economy

Macro Perspectives: Thu 2 Sep 2021

It's jobs week. The ADP jobs report yesterday showed a big miss for a second consecutive month.

What does this mean for the big jobs report due on Friday?

Keep in mind, this ADP report (which is aggregated from actual payroll data from U.S. ADP payroll clients) tends to be better at predicting the final revision of the big government published jobs report (the BLS's nonfarm payrolls), rather than the first print.

In the July report, the ADP reported a big negative surprise. A couple days later, the BLS reported a big positive surprise.

With that, should we expect the BLS to report a negative revision to their July number on Friday? And if that's the case, reflecting an employment picture less optimistic than we thought from this prior report, will we get a negative surprise on Friday? Maybe.

There was indeed uncertainty surrounding the virus throughout the month of August and that may have weighed on new hiring. We know, from private jobs listings, there remains around 1.4 million unfilled jobs. So the number may very well come in softer on Friday.

However the jobs report, at this stage, isn't a view on economic health. It's a view on policy, and getting people back to work. Over the course of July and August half of the states have now withdrawn from the federal unemployment subsidy - this means that September jobs data should start reflecting policy that is incentivising people to get back to work (at least in half of the country).