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Employment Situation Preview

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On Friday, at 8:30 AM ET, the BLS will release the employment report for April. The consensus is for an increase of 153,000 non-farm payroll jobs in April, and for the unemployment rate to be unchanged at 7.6%.

Here is a summary of recent data:

• The ADP employment report showed an increase of 119,000 private sector payroll jobs in April. This was below expectations of 155,000 private sector payroll jobs added. The ADP report hasn’t been very useful in predicting the BLS report for any one month. In general this suggests employment growth below expectations.

• The ISM manufacturing employment index decreased in April to 50.2% from 54.2% in March. 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 decreased by close to 20,000 in April. The ADP report indicated a 10,000 decrease in manufacturing jobs.

The ISM non-manufacturing (service) employment index will be released on Friday after the employment report.

• Initial weekly unemployment claims averaged about 342,500 in April. This was down from 355,000 in March, and the lowest average for a month this year.

For the BLS reference week (includes the 12th of the month), initial claims were at 355,000; up from 341,000 in March.

• The final April Reuters / University of Michigan consumer sentiment index decreased to 76.4, down from the March reading of 78.6. This is frequently coincident with changes in the labor market, but also strongly related to gasoline prices and other factors. Note: the preliminary index dipped mid-month suggesting some weakness during the reference period (we saw the same pattern in March with the preliminary reading lower).

• The small business index from Intuit showed 20,000 payroll jobs added, up from 15,000 in March. This index remains disappointing.

• And on the unemployment rate from Gallup: Seasonally Unadjusted Unemployment Declines in April

Gallup’s unadjusted unemployment rate for the U.S. workforce was 7.4% for the month of April, down more than half a point since March 2013, and nearly a one-point drop from April 2012. This is the second-lowest monthly employment rate Gallup has measured since it began tracking employment in 2010. …

Gallup’s seasonally adjusted U.S. unemployment rate for April was 7.8%, unchanged from March 2013, but down almost a full point compared with April 2012.

Note: So far the Gallup numbers haven’t been very useful in predicting the BLS unemployment rate.

• Conclusion: The employment related data was mostly disappointing in April.  The ADP and ISM manufacturing reports suggest a decrease in hiring (the ISM service report will not be released until after the BLS report), the small business index increased but was still weak, and weekly claims for the reference week were higher in April than in March (although claims for the month were lower). 

There is always some randomness to the employment report, but my guess is the BLS will report somewhat below the consensus of 153,000 jobs added in April.
Calculated Risk

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