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Thursday, March 07, 2013

Employment Situation Preview

by Calculated Risk on 3/07/2013 04:38:00 PM

On Friday, at 8:30 AM ET, the BLS will release the employment report for February. The consensus is for an increase of 171,000 non-farm payroll jobs in February, and for the unemployment rate to decrease to 7.8% (from 7.9% in January).

Here is a summary of recent data:

• The ADP employment report showed an increase of 198,000 private sector payroll jobs in February. This was above expectations of 173,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, although the methodology changed last year. In general this suggests employment growth somewhat above expectations.

• The ISM manufacturing employment index declined in February to 52.6%, down from 54.0% in January. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS reported payroll jobs for manufacturing declined slightly in February.

The ISM non-manufacturing (service) employment index decreased slightly in February to 57.2%, down from 57.5% in January. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for services, suggests that private sector BLS reported payroll jobs for services increased about 250,000 in February.

Added together, the ISM reports suggests about 245,000 jobs added in November.

Initial weekly unemployment claims averaged about 355,000 in February. This was up slightly from January, but near the lowest level since early 2008.

For the BLS reference week (includes the 12th of the month), initial claims were at 366,000; up from 335,000 in January.

• The final February Reuters / University of Michigan consumer sentiment index increased to 77.6, up from the January reading of 73.8. This is frequently coincident with changes in the labor market and stock market, but also strongly related to gasoline prices and other factors. This might suggest some increase in employment, but the level still suggests a weak labor market.

• The small business index from Intuit showed 15,000 payroll jobs added, down from 25,000 in January. This is disappointing.

• And on the unemployment rate from Gallup: Gallup's U.S. unemployment rate, without seasonal adjustment, increases to 8.0%

Gallup's unadjusted employment rate for the U.S. workforce was 8.0% for the month of February, a slight uptick from 7.8% in January, but down markedly from 9.1% in February 2012.

Gallup's seasonally adjusted U.S. unemployment rate for February was 7.6%, a modest increase from 7.3% in January, but down a full percentage point from February 2012.
Note: So far the Gallup numbers haven't been very useful in predicting the BLS unemployment rate.

• Conclusion: The employment related data was mixed in February.  The ADP and ISM reports suggest an increase in hiring, but the small business index was weak, and weekly claims were slightly higher in February than in January when the BLS reported 157,000 payroll jobs were added.  There is always some randomness to the employment report, but my guess is around the consensus of 171,000 jobs.