Thursday, January 07, 2016

Preview: Employment Report for December

by Bill McBride on 1/07/2016 12:37:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for December. The consensus, according to Bloomberg, is for an increase of 200,000 non-farm payroll jobs in December (with a range of estimates between 170,000 to 249,000), and for the unemployment rate to be unchanged at 5.0%.

The BLS reported 211,000 jobs added in November.

Here is a summary of recent data:

• The ADP employment report showed an increase of 257,000 private sector payroll jobs in December. This was above expectations of 190,000 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 above expectations.

• The ISM manufacturing employment index decreased in December 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 December. The ADP report indicated a 2,000 increase for manufacturing jobs.

The ISM non-manufacturing employment index increased in December to 55.7%. A historical correlation  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 230,000 in December.

Combined, the ISM indexes suggests employment gains of 200,000.  This suggests employment growth close to expectations.

Initial weekly unemployment claims averaged close to 275,000 in December, up from 270,000 in November. For the BLS reference week (includes the 12th of the month), initial claims were at 271,000, down slightly from 272,000 during the reference week in November.

The slight decrease during the reference suggests about the same level of layoffs in December as in November.

• The final December University of Michigan consumer sentiment index increased to 92.6 from the November reading of 91.3. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like lower gasoline prices.

• Trim Tabs reported that the U.S. economy added between 120,000 to 150,000 jobs in December, down from their estimate of 168,000 jobs in November. Note: "TrimTabs’ employment estimates are based on analysis of daily income tax deposits to the U.S. Treasury from the paychecks of the 142 million U.S. workers subject to withholding."

• Conclusion: Unfortunately none of the indicators above is very good at predicting the initial BLS employment report.  Based on these indicators, it appears job gains should be around 200 thousand again in December.