Thursday, May 31, 2018

May Employment Preview

by Bill McBride on 5/31/2018 12:19:00 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 190,000 non-farm payroll jobs in May (with a range of estimates between 155,000 to 220,000), and for the unemployment rate to be unchanged at 3.9%.

The BLS reported 164,000 jobs added in April.

Here is a summary of recent data:

• The ADP employment report showed an increase of 178,000 private sector payroll jobs in May. This was slightly below consensus expectations of 186,000 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 and non-manufacturing surveys will be released after the employment report this month.

Initial weekly unemployment claims averaged 222,000 in May, about the same as in April. For the BLS reference week (includes the 12th of the month), initial claims were at 223,000, down from 233,000 during the reference week in April.

The slight decrease during the reference week suggests a slightly stronger employment report in May than in April.

• The final May University of Michigan consumer sentiment index decreased to 98.0 from the April reading of 98.8. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Merrill Lynch has introduced a new payrolls tracker based on private internal BAC data. The tracker suggests private payrolls increased by 227,000 in May, and this suggests employment growth above expectations.

• Looking back at the three previous years:

In May 2017, the consensus was for 185,000 jobs, and the BLS reported 138,000 jobs added. In May 2016, the consensus was for 158,000 jobs, and the BLS reported 38,000 jobs added. In May 2015, the consensus was for 220,000 jobs, and the BLS reported 280,000 jobs added.

• Conclusion:  In general, these reports suggest a solid employment report, and probably close to expectations.  The ADP report suggests a report slightly below expectations, but the reference week for unemployment claims, and the Merrill payrolls tracker suggest a stronger report.   My guess is that the employment report will be close to the consensus in May.