Wednesday, May 06, 2015

Preview: Employment Report for April

by Bill McBride on 5/06/2015 11:45:00 AM

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 220,000 non-farm payroll jobs in April (with a range of estimates between 180,000 and 335,000), and for the unemployment rate to decline to 5.4%.

The BLS reported 126,000 jobs added in March.

Here is a summary of recent data:

• The ADP employment report showed an increase of 169,000 private sector payroll jobs in April. This was below expectations of 205,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month (see table at bottom), but in general, this suggests employment growth below expectations.

• The ISM manufacturing employment index decreased in April to 48.3%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs decreased about 30,000 in April. The ADP report indicated a 10,000 decrease for manufacturing jobs.

The ISM non-manufacturing employment index increased in April 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 250,000 in April.

Combined, the ISM indexes suggests employment gains of 220,000.  This suggests employment growth at expectations.

Initial weekly unemployment claims averaged close to 283,000 in April, down slightly from March. For the BLS reference week (includes the 12th of the month), initial claims were at 296,000; this was up slightly from 293,000 during the reference week in March.

Generally this suggests about the same low level of layoffs in April as for the previous eight months (employment gains averaged 253,000 per month over that period).

• The final April University of Michigan consumer sentiment index increased to 95.9 from the March reading of 93.0. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like gasoline prices.

• On small business hiring: The small business index from Intuit showed a 15,000 increase in small business employment in April, the same strong level as in March.

• Trim Tabs reported that the U.S. economy added 327,000 jobs in April. This is up from their estimate of 268,000 last month. "TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 140 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). Two key points:

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

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

There is always some randomness to the employment report.  My guess is something close to the consensus this month.

Employment Indicators (000s)
Jan 201416611317523632910
Feb 2014188175139-63340
Mar 20142251921911533230
Apr 2014330288220NA32025
May 201423621717913032735
Jun 2014286288281NA31420
Jul 2104249209218NA30315
Aug 20142131422042852990
Sep 2014250248213NA28110
Oct 201422121423034028415
Nov 201442332120826029230
Dec 201432925224125228930
Jan 201520125721311530820
Feb 201526429521223528210
Mar 2015
Apr 2015
1Lower is better for Unemployment Claims