by Calculated Risk on 7/06/2023 05:45:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for June. The consensus is for 200,000 jobs added, and for the unemployment rate to be unchanged at 3.7%.

There were 339,000 jobs added in May, and the unemployment rate was at 3.7%.

From BofA economists:

"Nonfarm payrolls likely rose by 250k in June after adding 339k jobs in May. ... Given our forecasts of the participation rate and nonfarm payroll growth, we expect the unemployment rate will fall from 3.7% to 3.6%."

From Goldman Sachs following the strong ADP report:

We estimate nonfarm payrolls rose by 250k in June (mom sa). Job growth tends to pick up in June when the labor market is tight—reflecting strong hiring of youth summer workers ... We estimate the unemployment rate pulled back by one tenth to 3.6% (consensus also 3.6%) reflecting a rise in household employment and unchanged labor force participation at 62.6%.

• ADP Report: The ADP employment report showed 497,000 private sector jobs were added in June.  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 decreased in June to 48.1%, down from 51.4% last month.   This would suggest about 30,000 jobs lost in manufacturing. The ADP report indicated 42,000 manufacturing jobs lost in May.

The ISM® services employment index increased in June to 53.1%, up from 49.2% last month.   This would suggest about 160,000 jobs added in the service sector. Combined this suggests job gains of 120,000, well below consensus expectations.

• Unemployment Claims: The weekly claims report showed a sharp increase in the number of initial unemployment claims during the reference week (includes the 12th of the month) from 246,000 in May to 265,000 in June.  This suggests more layoffs in June than in May.

•  COVID: As far as the pandemic, the number of patients hospitalized during the reference week in June was around 6,400, down from 8,300 in May.  

• Conclusion: All the key indicators suggest another solid employment report in June.  We've seen an upside surprise in employment almost every month, however someday we will see a downside surprise.