By Steven R. Drexel, President and CEO of Cornerstone Staffing Solutions, Inc.

As an Economist and seasoned staffing industry professional, I’m regularly asked to participate in a number of monthly surveys and discussions that predict key elements of the next Bureau of Labor Statistics’ (“BLS”) press release describing The Employment Situation.  The next release revealing August’s statistics will be out on Friday, September 4th, (typically the first Friday of each month reporting the previous month’s activity.)

The BLS offers many statistics covering weekly, monthly, quarterly and yearly data comparisons.  Insofar as I dive deep into the data (national, industry and company), this commentary shares my thoughts and observations directly related to predicting how August will perform compared to the recent past.  Cornerstone’s stakeholders and other interested parties may find the following remarks helpful in assisting with business strategies and objectives for the near term.

In this Commentary, I address the following:

• Some final observations from July’s release
• What should we expect related to China and the Financial Market turmoil
• Expectations regarding August’s employment situation

First a few words about July’s release.  I expected July to produce 240,000 new jobs and a 5.3% unemployment rate.  In the published analysis, the labor market sustained its growth pattern in July, at a moderate pace, as payrolls expanded by 215,000 jobs and the unemployment rate held steady at 5.3%.  The payroll growth was modestly less than the consensus expectation and slightly less than the average for recent months.  While not accelerating, the growth remained close enough to the trend rate to reassure analysts and policy makers that the economy was on track and consistent with slow but steady growth in the broader economic landscape.

What should we expect related to China and the Financial Markets?  Let’s address the pressing current events related to China and the equity markets.  With respect to this Friday’s Employment Situation report, there will be no impact since the Employment report is based on data collected during mid-August which was well before the more recent drama.  Over the longer term, slowing growth in China bears watching but should not ignite panic in the U.S.  One observation worth noting is that China is historically a communist state, so its stock market is not as important to the Chinese economy compared to the more market-oriented, Western democracies.  A second observation is that U.S. exports to China are relatively small totaling only about 7% of our outbound trade.  Slower global growth can stifle the U.S. economic engine, and dampen profits at many large U.S. multinational firms, but it should not completely derail the U.S. economy based on what we see today.   The U.S. Stock markets were due for a regular, periodic correction and speculation related to China and a change in U.S. interest rate policy has caused volatility, but anxiety in financial markets is not evident on Main Street as measured by the weekly surveys and reports that economists follow.

What should we expect for August? I expect Friday’s Employment Situation Report to indicate that the labor market expanded by 200,000 jobs and the unemployment rate held steady at 5.3%.  Most economic indicators point to a gain similar to July, or growth slightly better than July’s report — but August has proven to be a statistically troublesome reporting period with the initial report historically falling short of the estimates and expectations.  Therefore my prediction of slower growth is more about reporting noise and technical adjustments rather than a weaker labor market.

Positive employment indicators during August included Initial Jobless Claims which have continued to improve, during the August reporting period; Initial Jobless Claims were about 3% better than the similar July reference period.  Further, the employment component of the Purchasing Manager’s Non-manufacturing Index improved to 59.6 up from 52.7 during July.  The Conference Board’s Consumer Confidence Index reported labor market improvement as the differential between “jobs plentiful” and “jobs hard to get” improved from -7.5 in July to 0.0 or even during August – marking the first time this differential measure has been even or better since 2008.  The American Staffing Association’ Index was 4.5% improved in August compared to July.

Negative employment indicators during August include the Purchasing Manager’s Manufacturing Employment Index which declined to 51.2 in August from the previous month’s 52.7 reading.  Also the Intuit Small Business Employment Index declined modestly during August (the first decline in four years).

The private employment surveys that I participate in have been guardedly optimistic or otherwise positive regarding August.

Economic forecasters continue to back the notion the economy is tracking along at a steady 2.0% to 2.4% annual growth rate consistent with continued stable employment growth and a gradually declining unemployment rate.  The bias however has turned more cautious while events in Asia and the financial markets play out.  Fundamentally, the U.S. economy is healthy with solid demand and low inflation giving rise to the belief that volatility in the financial market can be tolerated either because the duration is short or the swings are within endurable ranges.   Certainly, the risks have increased and the view could change because at some point, apprehension can depress demand which would be a bigger threat to the recovery.

In conclusion, I expect August to produce 200,000 new jobs and a 5.3% unemployment rate.  The balance of tailwinds and headwinds suggests that the employment picture will remain healthy and on the right trajectory.  Expect labor markets to gradually tighten with progressively increasing wage pressure this year and next. Don’t panic regarding the recent headlines but be sensitive to signs of slowing activity.  I invite you to call me if you have any questions and share this commentary with your colleagues and professional network.

More about Cornerstone Staffing Solutions

Cornerstone Staffing Solutions is among the top 120 largest staffing firms in America, as ranked by Staffing Industry Analysts. Since 2003, Cornerstone has grown from a neighborhood staffing provider to a $100 million national firm that employs thousands of people at hundreds of companies from California to Connecticut. Providing candidate searching and job placement for administrative, industrial, technical, sales and transportation positions, Cornerstone truly is where talent and jobs meet. Visit us at: www.cornerstone-staffing.com.