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By Jason Stipp and Robert Johnson, CFA | 09-05-2012 12:00 PM

Swing Factors and Wild Cards in the August Employment Report

Quirks in auto and education employment, plus recent strength in the consumer sector could impact Friday's jobs report, says Morningstar's Bob Johnson.

Note: Vishnu Lekraj, who normally joins our employment reports, is away from the office this week.

Jason Stipp: I'm Jason Stipp for Morningstar. After a relatively strong month in July for employment gains, what should we expect for the August number which is due Friday? Here to offer some insights is Morningstar's Bob Johnson, our director of economic analysis.

Bob, thanks for joining me.

Bob Johnson: Great, to be here.

Stipp: In July, we had a 163,000 jobs added to the economy. So in August, a lot of the consensus is looking for fewer jobs added to the economy. I wanted to talk to you about some of the headwinds and tailwinds for that employment report for August that’s due on Friday. Let's talk about the bad news first what could keep the number back a little bit. July was pretty strong. Just because that one was strong, should you temper your expectations for August?

Johnson: Well, there has been a tendency when you have a really good month that's followed by a bad month and a bad month that's followed by a good month. So there has been a little bit of that trend going on, but there are some things that are very specific to the July report that may not recur in the August report.

Stipp: One of those has to do with the auto industry, which you've been tracking closely for a while. Why might July have been better because of autos and August might be a little worse than expected because of that same factor?

Johnson: Well, oddly the automobile industry has been doing quite well. So, the summer shutdowns were at a little bit different time than they usually were, a little bit shorter. And so you had a number of factors that made July's numbers look a little bit better because it’s usually a big shutdown month and they take the number of jobs and multiplied by a factor to get to it, and this year we didn’t have as many shutdowns. So that added maybe as many as 20,000 jobs to the July report, and those may come back off again in August, so that could be as much as 40,000 swing right there from the auto industry. But now the good news is a bad-news thing. The reason the July numbers were good was because they didn't shut down their plans, and we saw Tuesday that we had some really great auto sales for the month of August. We had BMW reporting that they didn’t have enough cars even to sell in the month of August, hurting to their statistics. So, again, if it is the autos thing, keep in mind the big picture is that autos are doing just fine. Thank you.

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