April Employment Preview

On Friday at 8:30 AM ET, the BLS will release the employment report for April. The consensus is for 178,000 jobs added, and for the unemployment rate to increase to 3.6%.

There were 236,000 jobs added in March, and the unemployment rate was at 3.5%.

From BofA economists:

"For the April employment report, we expect the data to show a moderation from red-hot hiring to strong hiring. We forecast nonfarm payroll growth of 200k. While this would signal that the pace of hiring is cooling, it would still mean hiring is exceeding the level needed to offset population growth (roughly 70k to 100k). Moreover, we look for the unemployment rate to remain unchanged at an astoundingly low level of 3.5%."

From Goldman Sachs following the strong ADP report:

"We boosted our nonfarm payroll forecast by 25k to +250k (mom sa)."

• ADP Report: The ADP employment report showed 296,000 private sector jobs were added in April.  This suggests job gains well above consensus expectations, however, in general, ADP hasn't been very useful in forecasting the BLS report.

• ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index increased in April to 50.2%, up from 46.9% last month.   This would suggest about 20,000 jobs lost in manufacturing. The ADP report indicated 38,000 manufacturing jobs lost in April.

The ISM® services employment index decreased in April to 50.8%, from 51.3% last month.   This would suggest service employment increased 95,000 in April.

Combined, the ISM surveys suggest 75,000 jobs added in April (well below the consensus forecast).

• Unemployment Claims: The weekly claims report showed essentially no change in the number of initial unemployment claims during the reference week (includes the 12th of the month) from 247,000 in March to 245,000 in April.  There has been a general increase in unemployment claims suggesting more layoffs recently.

•  COVID: As far as the pandemic, the number of weekly cases during the reference week in March was around 102,000, down from 165,000 in March.  

• Conclusion: a 178K report would be solid given the various indicators suggesting a slowdown in the economy.  Some of the usual indicators - like the ISM reports and the unemployment claims - suggest a slowdown in job growth in April, although the ADP report suggests a pickup in employment.  We've seen upside surprise in employment almost every month, however my sense is this report will be at or below the consensus.