August Nonfarm Payroll Numbers Lower than Forecasted? Wait for the Revisions

September 04, 2015
nonfarm payroll
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Today’s employment report showed that labor market conditions remain strong. Through the first eight months of 2015, total nonfarm payrolls have increased by an average of 212,000 per month. Although today’s increase in nonfarm payrolls was strong as well (173,000), they nonetheless rose by less than markets were expecting (220,000).

Interestingly, a similar development occurred last year when August 2014 nonfarm payrolls came in much weaker than expected. This development caused some alarm, since it signaled a potential weakening in economic activity.

In fact, for the past five years, markets have overestimated the August payroll number, as shown in the figure below.

nonfarm payroll

Importantly, though, subsequent revisions indicated that August job growth from 2011 to 2014 was much stronger than initially reported, as seen in the following figure. From 2011 to 2014, the original estimated increase of nonfarm payroll employment (NFP) averaged 101,750, but the third estimate (second revision) averaged 184,250. This produces an average upward revision of 82,500.

nonfarm payroll

In short, if the pattern of revisions from the past few years holds again this year, then a reasonable assumption is that the August employment number will be revised upward—and by a lot. Accordingly, if we add this average upward revision to today’s NFP estimate (173,000), we get a projected third estimate of 255,500. (This estimate will be released in November.)

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About the Author
Kevin Kliesen
Kevin L. Kliesen

Kevin L. Kliesen is a business economist and research officer at the Federal Reserve Bank of St. Louis. His research interests include business economics and monetary and fiscal policy analysis. He joined the St. Louis Fed in 1988. Read more about the author and his research.

Kevin Kliesen
Kevin L. Kliesen

Kevin L. Kliesen is a business economist and research officer at the Federal Reserve Bank of St. Louis. His research interests include business economics and monetary and fiscal policy analysis. He joined the St. Louis Fed in 1988. Read more about the author and his research.

This blog offers relevant commentary, analysis, research and data from our economists and other St. Louis Fed experts. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.


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