The “big wildcard” in making July payroll projections is the size of the swing in public school teachers and other school workers.
Because of the size of teacher layoffs and the effect of the July 4th holiday on the data, the July seasonal adjustment factor can vary significantly from one year to the next, and the variation can be extreme, says Ward McCarthy, managing director and chief financial economist at Jefferies & Co in New York.
Many public school teachers, in addition to some other public school employees, are hired on a ten-month calendar that runs from September through June, large-scale layoffs occurring in July and large-scale hiring occurring in September.
McCarthy says the July layoffs tend to exceed one million, so even a small percentage deviation from the norm can have a significant effect on the data.
Since 2000, the July seasonal adjustment factor for private payrolls has added as few as 16,000 private sector jobs and as many as 274,000 private sector jobs, he says.