Thursday, April 04, 2013

Employment Situation Preview

by Bill McBride on 4/04/2013 02:13:00 PM

On Friday, at 8:30 AM ET, the BLS will release the employment report for March. The consensus is for an increase of 193,000 non-farm payroll jobs in March, and for the unemployment rate to be unchanged at 7.7%.

Here is a summary of recent data:

• The ADP employment report showed an increase of 158,000 private sector payroll jobs in March. This was below expectations of 205,000 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 below expectations.

• The ISM manufacturing employment index increased in March to 54.2%, up from 52.6% in February. 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 increased by a few thousand in March.

The ISM non-manufacturing (service) employment index decreased in March to 53.3%, down from 57.2% in February. 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 almost 150,000 in March.

Added together, the ISM reports suggests about 150,000 jobs added in March.

Initial weekly unemployment claims averaged about 354,000 in March. This was about the same as in February.

For the BLS reference week (includes the 12th of the month), initial claims were at 341,000; down from 366,000 in February.   The recent increase in claims (probably due to the sequestration budget cuts) was probably before the reference week (when the BLS conducts the employment surveys).

• The final February Reuters / University of Michigan consumer sentiment index increased to 78.6, up from the February reading of 77.6. 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 a stronger employment report, but the level still suggests a weak labor market.   Note: the preliminary index dipped suggests some weakness mid-month.

• The small business index from Intuit showed 10,000 payroll jobs added, the same as in February. This index remains disappointing.

• And on the unemployment rate from Gallup: Seasonally Unadjusted Unemployment Unchanged in March

Gallup's unadjusted unemployment rate for the U.S. workforce was 8.0% for the month of March, the same as in February, but a modest improvement from 8.4% in March 2012.

Gallup's seasonally adjusted U.S. unemployment rate for March was 7.8%, a slight uptick from 7.6% in February, but down since March 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 March.  The ADP and ISM reports suggest a decrease in hiring, the small business index was weak, but weekly claims for the reference week were lower in March than in February when the BLS reported 236,000 payroll jobs were added.  There is always some randomness to the employment report, but my guess is the BLS will report somewhat below the consensus of 193,000 jobs added in March.