Thursday, May 01, 2014

Employment Report Preview for April

by Bill McBride on 5/01/2014 05:45:00 PM

Friday at 8:30 AM ET, the BLS will release the employment report for April. The consensus, according to Bloomberg, is for an increase of 215,000 non-farm payroll jobs in April (range of estimates between 190,000 and 279,000), and for the unemployment rate to decline to 6.6%.

Note: The BLS reported 192,000 payroll jobs added in March with the unemployment rate at 6.7%.

Here is a summary of recent data:

• The ADP employment report showed an increase of 220,000 private sector payroll jobs in April. This was close to expectations of 210,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth close to expectations.

• The ISM manufacturing employment index increased in April to 54.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs increased about 6,000 in April. The ADP report indicated a 1,000 increase for manufacturing jobs in April.

This month the ISM non-manufacturing (service) report will be released on Monday, May 5th - after the release of the BLS employment report.

Initial weekly unemployment claims averaged close to 320,000 in April. This was essentially unchanged from March.   For the BLS reference week (includes the 12th of the month), initial claims were at 304,000; this was down from 323,000 during the reference week in March.

This suggests some upside to the consensus forecast.

• The final April Reuters / University of Michigan consumer sentiment index increased to 84.1 from the March reading of 80.0. This is frequently coincident with changes in the labor market, but there are other factors too.

• The small business index from Intuit showed a 25,000 increase in small business employment in April - the largest gain in a year:

“This month’s employment increase comes after three successive months with little-to-no small business employment growth. In fact, it’s the fastest rate we’ve seen over the past year,” said Susan Woodward, the economist who works with Intuit to create the indexes. “Despite this growth, these figures do not paint an optimistic picture. We still have an economy with high unemployment."
• Conclusion: The ADP report was higher in April compared to the March report - and in line with most forecasts, weekly unemployment claims were low during the reference period, the Intuit small business index showed the most hiring in a year, and the ISM manufacturing survey suggests an increase in hiring (but the the service sector report isn't available).   Most of the indicators suggest a solid employment report.

Also - it is possible that there will be some additional bounce back from the below trend employment reports over the winter (weather related). 

There is always some randomness to the employment report, but the I'll take the over on the consensus forecast of 215,000 nonfarm payrolls jobs added in April.

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