Wednesday, December 03, 2014

Preview: Employment Report for November

by Bill McBride on 12/03/2014 04:00:00 PM

Friday at 8:30 AM ET, the BLS will release the employment report for November. The consensus, according to Bloomberg, is for an increase of 230,000 non-farm payroll jobs in November (with a range of estimates between 140,000 and 275,000), and for the unemployment rate to be unchanged at 5.8%.

The BLS reported 214,000 jobs added in October.

Here is a summary of recent data:

• The ADP employment report showed an increase of 208,000 private sector payroll jobs in November. This was below expectations of 226,000 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 slightly below expectations.

• The ISM manufacturing employment index decreased in November to 54.9%. 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 7,000 in November. The ADP report indicated a 11,000 increase for manufacturing jobs in November.

The ISM non-manufacturing employment index decreased in November to 56.7%. A historical correlation (linear) between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 253,000 in November.

Combined, the ISM indexes suggests employment gains of 260,000.  This suggests growth above expectations.

Initial weekly unemployment claims averaged close to 294,000 in November, up from 287,000 in October. For the BLS reference week (includes the 12th of the month), initial claims were at 292,000; this was up from 284,000 during the reference week in October.

Generally this suggests about the same low level of layoffs in November as in September and October.

• The final November Reuters / University of Michigan consumer sentiment index increased to 88.8 from the October reading of 86.9. This was the highest level in more than seven years. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like sharply lower gasoline prices.

• On small business hiring: The small business index from Intuit showed a 30,000 increase in small business employment in November (up from 15,000 in October):

Small business added 30,000 new people to its base of 20.5 million employees.

"Small businesses are not just hiring, they are also paying employees more and asking them to work longer hours. All of these figures are seasonally adjusted, so this is not influenced by just holiday activity," said Susan Woodward, the economist who works with Intuit to create the Small Business Employment and Revenue Indexes.

Hourly employees worked 20 minutes longer in November than they did in October, a sharp rise, and the fraction of hourly workers working full–time rose by 0.2 percent for the month. The hiring rate rose to 5.8 percent for the month, the highest since January 2009.

Compensation per employee, which includes business owners, rose $9 for the month, or 0.34 percent, to $33,305 per year.
• Trim Tabs reported:
TrimTabs Investment Research estimates that the U.S. economy added 306,000 jobs in November, little changed from 314,000 jobs in October.

“Hiring kicked into higher gear just in time for the holiday shopping season,” said David Santschi, Chief Executive Officer of TrimTabs. “Job growth in the past two months was the highest since May 2010, when census-related hiring skewed the data.” ... TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 141 million U.S. workers subject to withholding
• Conclusion: Below is a table showing several employment indicators and the initial BLS report (the first column is the revised employment). A few key points:

1) All but one of the revisions this year have been up (average about 22,000).

2) Unfortunately none of the indicators below is very good at predicting the initial BLS employment report.  

3) In general it looks like this should be another 200+ month (based on ADP, ISM, unemployment claims, and small business hiring).

There is always some randomness to the employment report.  The consensus forecast is pretty strong, but I'll take the over again (above 230,000).

Employment Indicators (000s)
  BLS
Revised
BLS
Initial
ADP
Initial
ISMWeekly
Claims
Reference
Week1
Intuit
Small
Business
Jan14411317523632910
Feb222175139-63340
Mar2031921911533230
Apr304288220NA32025
May22921717913032735
Jun267288281NA31420
Jul243209218NA30315
Aug2031422042852990
Sep256248213NA28110
Oct  21423034028415
Nov  Friday20826028230
1Lower is better for Unemployment Claims