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Thursday, December 05, 2019

November Employment Preview

by Calculated Risk on 12/05/2019 11:24:00 AM

Special Notes on GM Strike and the Decennial Census: The GM strike ended in October, and 46,000 workers were on strike during the BLS reference week in October. These workers returned to their jobs in November, and this should boost employment gains for November. Decennial Census: In August and September, the Census Bureau increased the number of temporary workers by 25,000. This phase of the Decennial Census ended mid-October, and most of these temporary workers were let go in October (20,000), however another 5,000 or so were probably let go in November.

On Friday at 8:30 AM ET, the BLS will release the employment report for November. The consensus is for an increase of 180,000 non-farm payroll jobs in October, and for the unemployment rate to be unchanged at 3.6%.

Last month, the BLS reported 128,000 jobs added in October (including 20,000 temporary Census fires).

Here is a summary of recent data:

• The ADP employment report showed an increase of 67,000 private sector payroll jobs in October. This was well below consensus expectations of 140,000 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 decreased in November to 46.6%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll decreased around 40,000 in November. The ADP report indicated manufacturing jobs decreased 6,000 in November.

The ISM non-manufacturing employment index increased in November to 55.5%. 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 220,000 in November.

Combined, the ISM surveys suggest employment gains at 180,000 suggesting gains close to consensus expectations.

Initial weekly unemployment claims averaged 218,000 in November, up from 215,000 in October. For the BLS reference week (includes the 12th of the month), initial claims were at 228,000, up from 218,000 during the reference week the previous month.

This suggest a few more layoffs (during the reference week) in November than in October.

• The final November University of Michigan consumer sentiment index increased to 96.8 from the October reading of 95.5. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• The BofA job tracker bounced back in November suggesting 195K jobs added in November.

• Conclusion: There were special factors in October (GM strike, decennial Census layoffs) that reduced employment. In November, the resolution of the GM strike will boost employment. Based on these indicators, my guess is employment gains are close to expectations.