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 be unchanged at 3.9%.

There were 175,000 jobs added in April, and the unemployment rate was at 3.9%.

From Goldman Sachs economist Spencer Hill

We estimate nonfarm payrolls rose by 160k in May, somewhat below consensus ... We estimate that the unemployment rate was unchanged on a rounded basis at 3.9%.
emphasis added

From BofA:

The May employment report is likely to show a healthy but better-balanced labor market. Nonfarm payrolls likely rose by 200k ...Strong hiring is likely to result in the unemployment rate edging down a tenth to 3.8%, and wage growth will likely remain at 3.9% y/y.

• ADP Report: The ADP employment report showed 152,000 private sector jobs were added in May.  This was below consensus forecasts and suggests job gains slightly below consensus expectations, however, in general, ADP hasn't been very useful in forecasting the BLS report.

• ISM Surveys: Note that the ISM indexes are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index increased to 51.1%, up from 48.6% the previous month.   This would suggest about 15,000 jobs lost in manufacturing. The ADP report indicated 20,000 manufacturing jobs lost in May.

The ISM® services employment index increased to 47.1%, from 45.9%.   This would suggest few jobs added in the service sector. Combined this suggests few jobs added in May, far below consensus expectations.

• Unemployment Claims: The weekly claims report showed about the same number of initial unemployment claims during the reference week at 216,000 in May compared to 212,000 in April.  This suggests a similar number of layoffs in May compared to April.

• Conclusion: My guess is employment gains will be below consensus expectations.