Thursday, December 01, 2011

Employment Situation Preview: Better, but still Weak

by Bill McBride on 12/01/2011 06:38:00 PM

Tomorrow (Friday) the BLS will release the November Employment Situation Summary at 8:30 AM ET. Bloomberg is showing the consensus is for an increase of 131,000 payroll jobs in November, and for the unemployment rate to remain unchanged at 9.0%. The consensus has been moving up all week and the "whisper" employment number is probably even higher.

Overall the economic data for November was fairly weak suggesting sluggish growth, but somewhat improved compared to recent months. So I'd expect a little better employment report - but that isn't saying much.

Here is a summary of recent data:

• The ADP employment report showed an increase of 206,000 private sector payroll jobs in November. Unfortunately ADP hasn't been very useful in predicting the BLS report. Also note that government payrolls have been shrinking by about 27,000 on average per month this year, so this suggests around 206,000 private nonfarm payroll jobs added, minus 27,000 government workers - or around 179,000 total jobs added in November.

• The ISM manufacturing employment index decreased to 51.8% from 53.5% in October. Based on a historical correlation between the ISM index and the BLS employment report for manufacturing, this reading suggests a loss of a few thousand private payroll jobs for manufacturing in October.

The ISM non-manufacturing index for November will be released next Monday.

Initial weekly unemployment claims averaged about 396,000 in November, down from 404,000 per week in October, and down from 418,000 per week in September.

For the BLS reference week (includes the 12th of the month), initial claims were at the lowest level since March and April - and the BLS reported an average of 205,500 jobs added for those two months.

• The final November Reuters / University of Michigan consumer sentiment index increased to 64.1 from 60.9 in October. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. In general this low level would suggest a weak labor market - but slightly better than in August, September and October (the BLS reported an average of 114,000 per month for those three months).

• And on the unemployment rate from Gallup: U.S. Unemployment Ticks Up in Mid-November

Unemployment, as measured by Gallup without seasonal adjustment, is 8.5% in mid-November -- up from 8.3% in mid-October, but down significantly from 9.2% in mid-November 2010. Gallup's mid-month unemployment measure suggests the government is likely to report no change in its seasonally adjusted unemployment rate for November 2011.
NOTE: The Gallup poll results are Not Seasonally Adjusted (NSA), so use with caution. Usually the NSA unemployment rate increases in November - so this would suggest little change in the headline seasonally adjusted unemployment rate.

There always seems to be some randomness to the employment report, but it does seem the situation has improved somewhat (lower initial weekly unemployment claims, more job openings). I'll go with the consensus forecast this month.