May Employment Preview

On Friday at 8:30 AM ET, the BLS will release the employment report for May. The consensus is for 180,000 jobs added, and for the unemployment rate to increase to 3.5%.

There were 253,000 jobs added in April, and the unemployment rate was at 3.4%.

From BofA economists:

"For the May employment report, we forecast a 200k increase in nonfarm payrolls (NFP), which would be a downshift from the addition of 253k jobs in April. Still it would leave payroll growth well above levels needed to offset the pace of natural growth in the labor force, thereby putting downward pressure on the unemployment rate in an already tight labor market ... we expect the unemployment rate to remain at 3.4%"

From Goldman Sachs following the strong ADP report:

According to the ADP report, private sector employment rose by 278k in May, 108k above consensus expectations and one of the stronger Big Data employment indicators in May. We left our nonfarm payroll forecast unchanged at +175k ahead of tomorrow’s release."

• ADP Report: The ADP employment report showed 278,000 private sector jobs were added in May.  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 May to 51.4%, up from 50.2% last month.   This would suggest about 10,000 jobs lost in manufacturing. The ADP report indicated 48,000 manufacturing jobs lost in May.

The ISM® services employment index for May has not been released yet.

• Unemployment Claims: The weekly claims report showed a decline in the number of initial unemployment claims during the reference week (includes the 12th of the month) from 246,000 in April to 225,000 in May.  This suggests fewer layoffs in May than in April.

•  COVID: As far as the pandemic, the number of patients hospitalized during the reference week in May was around 9,000, down from 13,000 in April.  

• Conclusion: All the key indicators suggest another solid employment report in May.  We've seen an upside surprise in employment almost every month, however someday we will see a downside surprise.  But it appears the May employment will be at or above the consensus forecast.