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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Lee Lichterman III who wrote (24378)	9/1/1999 11:58:00 AM
From: Les H	Read Replies (3) \| Respond to of 99985

US DATA PREVIEW: AUG PAYROLLS SEEN +215K; GOVT JOBS UPSIDE RISK By Marco Babic WASHINGTON (MktNews) - U.S. job creation continued in August, though not at the pace of the previous month, with manufacturing jobs growth expected to continue for the second month in a row and some forecast risk coming from government jobs, according to a Market News International survey of economists. The survey of 17 economists' forecasts resulted in a median of a 215,000 gain for August payrolls within a range of up 165,000 to up 275,000. Assuming the median forecast to be the actual result, the three-month average payroll gain is 266,000 for the June-August period. This is far more robust than the average 144,000 monthly jobs growth registered in the March-May period. The government component of the employment report poses some upside risk to the forecast as seasonal adjustment distortions could skew the data. At the same time, a recovery in manufacturing sector jobs could push average hourly earnings above expectations. In August of the past few years, the Bureau of Labor Statistics "has had difficulty seasonally adjusting the local education portion of government payrolls due to more teachers remaining on payrolls throughout the summer and to changes in the start of the school year," according to Credit Suisse First Boston economists Jay Feldman and Mike Cloherty. They noted that in August of the past three years, local education payrolls rose 21,000; 18,000 and 31,000, adding that "We think that this seasonal distortion will push up government payrolls this month." J.P. Morgan economist James F. O'Sullivan agreed, stating that "The main source of upside risk is government payrolls, where early hiring of teachers for the new school year could provide a boost." On the manufacturing side, jobs are seen growing by 5,000 in August, well below the 31,000 gain posted in July, but nevertheless positive. Forecasts in the MNI survey range from down 20,000 to up 25,000, and while opinions vary as to how the sector will perform, there is widespread consensus that the manufacturing sector has turned the corner. The prematurely released U.S. NAPM index showed the employment component rising to 53.4 in August from 49.6 in July. This argues "that the 31,000 gain in manufacturing jobs shown in the July employment report was no fluke," said First Union chief economist David Orr. While manufacturing jobs are expected to gain for the second consecutive month, "The advance will probably fall well shy" of the increase registered in July, according to Daiwa Securities America economist Michael Moran. Lehman Brothers economist Joe Abate said that "While we do not look for a repetition of last month's dramatic jump in manufacturing employment, we do anticipate at least another increase of 10,000. With a recovery in manufacturing sector jobs, average hourly earnings could come under some pressure as jobs in this sector tend to be better paid than in others. Average hourly earnings are seen rising 0.3% in August, according to the MNI median forecast, slowing from the 0.5% pace in July and 0.4% in June. There is also some upside risk here as well, given the "shifting mix of employment gains in favor of higher-wage manufacturing jobs," said CIBC's Avery Shenfeld. CSFB's Feldman and Cloherty agree that while hourly earnings are expected to slow following the sharp rise in July, "a stronger rebound than we anticipate in the higher paying manufacturing sector job count or overtime hours could nudge earnings higher still." The Labor Department is scheduled to release employment data at 8:30 a.m. EDT Friday, September 3. ALSO AT BONDS ONLINE: NAPM rose to 54.2 in August from 53.4. This was close to expectations. The price component rose to 59.8 from 54.7. This was the highest level since June ?94. THERE WERE WIDESPREAD INCREASES IN COMMODITY PRICES. This is significant because it is not just oil prices. The employment component also posted a healthy gain. This is causing some firms to revise their forecast for non-farm payrolls higher. This is a component of the employment report, which will be released Friday. THE MARKET IS CONCERNED ABOUT HOW THIS AND OTHER RECENTLY RELEASED DATA WILL AFFECT FED POLICY. Construction spending for July fell .5%. Expectations were for a rise of .4%. The previous month was revised from up .5% to down .1%. Declines in school construction and commercial industrial projects accounted for the declines. Construction spending is expected to pickup, as the housing market remains strong. Housing accounts for 50% of all construction spending. Bonds had little reaction to the data. The dollar continues to struggle against the yen. With the threat of intervention gone, a large supporting factor for the dollar is eliminated. Thursday will bring data on initial jobless claims, factory orders and revisions to productivity. bondsonline.com