by Calculated Risk on 7/04/2013 08:36:00 PM

First, the employment situation release tomorrow for June is the initial estimate. Since January 2011, there have been 29 monthly employment releases through May 2013, and 21 have been revised up so far. Since it looks like the annual revision (based on state level data) will be up again this year, I expect almost all of the revisions for the last year to be up with the final counting. So one key tomorrow will be to look at the revisions for April and May (reported as 149 and 175 thousand respectively in the last release).

Another key will be the unemployment rate. The current Fed forecast is for the unemployment rate to decline to the 7.2% to 7.3% range in Q4 2013 from just over a 7.8% average in Q4 of 2012. Of course the participation rate is important too (at 63.4% in May). Although the participation rate is expected to continue to decline over the next decade due to demographics, some bounce back (or at least stability) would be expected this year if the labor market is improving. We'd like to see the unemployment rate decline in June without a decline in the participation rate.

Also a reminder from the BLS on seasonal adjustments in the June report:

[I]n the household survey, the large number of youth entering the labor force each June is likely to obscure any other changes that have taken place relative to May, making it difficult to determine if the level of economic activity has risen or declined. Similarly, in the establishment survey, payroll employment in education declines by about 20 percent at the end of the spring term and later rises with the start of the fall term, obscuring the underlying employment trends in the industry. Because seasonal employment changes at the end and beginning of the school year can be estimated, the statistics can be adjusted to make underlying employment patterns more discernable.

Last year the BLS reported 1.33 million teens (16 to 19 years old) joined the labor force Not Seasonally Adjusted (NSA), but that was expected - and seasonally adjusted to just an increase of 93 thousand. This year a fairly large number of teens (409 thousand) joined the labor force in May (more than expected), so the June number will probably be a little lower. This is important because teens have a high unemployment rate - and the early entry this year (like happened in 2008) could have pushed up the overall unemployment rate in May.

Friday:
• At 8:30 AM ET, the Employment Report for June will be released. The consensus is for an increase of 161,000 non-farm payroll jobs in June following the 175,000 non-farm payroll jobs in May. The consensus is for the unemployment rate to decrease to 7.5% in June from 7.6% in May.