September jobs seen bouncing back from surprise dip

October 6, 2007 - 0:0

WASHINGTON (Reuters) -- The U.S. economy added a solid but unspectacular 94,000 jobs in September, bouncing back from the first drop in monthly hiring in four years during August, economists surveyed by Reuters forecast.

None of 81 economists polled by Reuters ahead of Friday's intensely awaited report on employment forecast a repeat of August's shock announcement when 4,000 jobs outside the farm sector were lost.
But even if jobs are created at the anticipated pace, it may be seen by financial markets at best as indicating that job prospects are dimming gradually instead of precipitously in response to weakening housing and mortgage sectors.
Analysts forecast the September unemployment rate to tick up to 4.7 percent from 4.6 percent.
Some of the forecast September jobs rise will come from more hiring by states as teachers head for the classroom to start a new school year.
August's surprise loss of jobs was partly attributable to fewer jobs for government education workers, a category that is vulnerable to seasonal swings.
Analysts said labor markets are slowly losing steam, not weakening sharply as the August report implied.
----------- August figures misled
""While the labor market is in the process of moderating, hiring is not nearly as weak as the August payroll figures suggested,"" RBS Greenwich Capital strategists wrote in a research note.
""The key to determining how much the labor market will deteriorate is the degree to which the remainder of the economy will suffer,"" RBS wrote.
Two other reports supported the impression that labor markets were softening, partly because of weaker housing and credit markets, but were not in a freefall.
Challenger, Gray, and Christmas reported that planned job cuts fell nearly 10 percent in September from August.
Most cuts were in firms linked to housing and sub-prime credit markets and more was forecast to come.
""The dominoes are likely to keep toppling as home values fall and foreclosures continue to rise,"" said John Challenger, who heads the Chicago-based job outplacement-tracking firm.
Separately, ADP Employer Services estimated that U.S. private employers likely added 58,000 jobs in September, in line with expectations.
ADP also revised down to 27,000 from 38,000 the number of private sector jobs created in August.
""This month's ADP National Employment Report was the third consecutive weak reading and confirms the recent deceleration of employment,"" said Joel Prakken, Chairman of Macroeconomic Advisers.
ADP said that construction jobs fell by 20,000 in September while employment in the financial sector shrank by 7,000.
---------- Benchmark revisions
Besides September's figures, the Friday report may also shed light on how job markets performed in the 12 months through March as the Bureau of Labor Statistics issues its preliminary estimate for the next benchmark revision to payroll employment.
The Labor Department will reconcile its earlier monthly estimates against state unemployment tax reports.
Analysts including Samuel Coffin, an economist with UBS Securities, think it will show less resilient markets than first thought.
""Tax data through December 2006 suggest payrolls gains were over-counted by a little over 200,000 during 2006,"" Coffin said.
He added, ""Historically, payrolls have tended to be undercounted when growth is accelerating and over-counted when growth is decelerating.""