Thursday, June 01, 2017

May Employment Preview

by Bill McBride on 6/01/2017 12:59:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for May. The consensus, according to Bloomberg, is for an increase of 185,000 non-farm payroll jobs in May (with a range of estimates between 140,000 to 231,000), and for the unemployment rate to be unchanged at 4.4%.

The BLS reported 211,000 jobs added in April.

Here is a summary of recent data:

• The ADP employment report showed an increase of 253,000 private sector payroll jobs in May. This was well above expectations of 170,000 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 increased in May to 53.5%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll was unchanged in May. The ADP report indicated 8,000 manufacturing jobs added in May.

The ISM non-manufacturing employment index for May hasn't been released yet.

Initial weekly unemployment claims averaged 238,000 in May, down from 243,000 in April. For the BLS reference week (includes the 12th of the month), initial claims were at 233,000, down from 243,000 during the reference week in April.

The decrease during the reference week suggests fewer layoffs during the reference week in May than in April. This suggests a somewhat stronger employment report in May than in April.

• The final May University of Michigan consumer sentiment index increased slightly to 97.1 from the April reading of 97.0. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion: None of the indicators alone is very good at predicting the initial BLS employment report.  The ADP report and weekly unemployment claims suggest stronger job growth in May.