Thursday, July 06, 2017

June Employment Preview

by Bill McBride on 7/06/2017 01:45:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for June. The consensus, according to Bloomberg, is for an increase of 170,000 non-farm payroll jobs in June (with a range of estimates between 140,000 to 200,000), and for the unemployment rate to be unchanged at 4.3%.

The BLS reported 138,000 jobs added in May.

Here is a summary of recent data:

• The ADP employment report showed an increase of 158,000 private sector payroll jobs in June. This was below expectations of 178,000 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 below expectations.

• The ISM manufacturing employment index increased in June to 57.2%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 20,000 in June. The ADP report indicated 6,000 manufacturing jobs added in June.

The ISM non-manufacturing employment index decreased in June to 55.8%. 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 June.

Combined, the ISM indexes suggests employment gains of about 250,000.  This suggests employment growth above expectations.

Initial weekly unemployment claims averaged 243,000 in June, up from 238,000 in May. For the BLS reference week (includes the 12th of the month), initial claims were at 242,000, up from 233,000 during the reference week in May.

The increase during the reference week suggests slightly more layoffs during the reference week in June than in May. This suggests a somewhat weaker employment report in June than in May.

• The final May University of Michigan consumer sentiment index decreased to 95.1 from the May reading of 97.1. 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 below consensus job growth in June, although the ISM reports suggest stronger job growth.