Thursday, January 03, 2019

December Employment Preview

by Calculated Risk on 1/03/2019 01:45:00 PM

Note: The Employment report will be released as scheduled, and not postponed by the government shutdown.

On Friday at 8:30 AM ET, the BLS will release the employment report for December. The consensus is for an increase of 180,000 non-farm payroll jobs in December (with a range of estimates between 160,000 to 200,000), and for the unemployment rate to be unchanged at 3.7%.

Last month, the BLS reported 155,000 jobs added in November.

Here is a summary of recent data:

• The ADP employment report showed an increase of 271,000 private sector payroll jobs in December. This was well above consensus expectations of 175,000 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 decreased in December to 56.2%. 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 15,000 in December. The ADP report indicated manufacturing jobs increased 12,000 in December.

The ISM non-manufacturing employment index will be released next week.

Initial weekly unemployment claims averaged 219,000 in December, down from 228,000 in November. For the BLS reference week (includes the 12th of the month), initial claims were at 217,000, down from 225,000 during the reference week the previous month.

The increase during the reference week suggests a stronger employment report in December than in November.

• The final November University of Michigan consumer sentiment index increased to 98.3 from the November reading of 97.5. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Looking back at the three previous years:

In December 2017, the consensus was for 190,000 jobs, ADP reported 250,000 private sector jobs added, and the BLS reported 148,000 jobs added.

In December 2016, the consensus was for 175,000 jobs, ADP reported 153,000 private sector jobs added, and the BLS reported 156,000 jobs added.

In December 2015, the consensus was for 200,000 jobs, ADP reported 257,000 private sector jobs added, and the BLS reported 292,000 jobs added.

It appears the consensus is frequently a little high for December.

• Conclusion:  In general these reports suggest a solid employment report.