Thursday, June 06, 2019

May Employment Preview

by Calculated Risk on 6/06/2019 03:07:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for May. The consensus is for an increase of 180,000 non-farm payroll jobs in May, and for the unemployment rate to increase to 3.7%.

Last month, the BLS reported 263,000 jobs added in April.

Here is a summary of recent data:

• The ADP employment report showed an increase of only 27,000 private sector payroll jobs in May. This was well below the 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 below expectations.

• The ISM manufacturing employment index increased in May to 53.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll was mostly unchanged in May. The ADP report indicated manufacturing jobs decreased 3,000 in May.

The ISM non-manufacturing employment index increased in May to 58.1%. 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 increased 290,000 in May.

Combined, the ISM surveys suggest employment gains above the consensus expectations.

Initial weekly unemployment claims averaged 213,000 in May, up slightly from April. For the BLS reference week (includes the 12th of the month), initial claims were at 211,000, up from 193,000 during the reference week the previous month.

The increase during the reference week suggests a weaker employment report in May than in April.

• The final April University of Michigan consumer sentiment index increased to 100.0 from the April reading of 97.2. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion:  The ISM reports combined were strong, however the ADP was very weak.   Almost opposites!   Both reports suggested manufacturing employment was weak.   Also the increase in unemployment claims during the reference week suggests a weaker report in May than in April.   Usually I put a little more emphasis on the ISM reports than the ADP report, so I'm going to ignore the weak ADP report (could be a mistake), and my guess is the employment report will be close to the consensus.