The first of a few signals leading up to Friday’s official jobs report from the Bureau of Labor Statistics suggests that the four-year stagnation continues. ADP and Moody’s Analytics calculates the overall growth of private-sector jobs, and usually (but not always) overshoots the BLS figures by a considerable amount, which makes their 135,000 figure look even weaker:
Private sector employment increased by 135,000 jobs from April to May, according to the May ADP National Employment Report® , which is produced by ADP® , a leading provider of human capital management solutions, in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. April’s job gains were revised downward to 113,000 from 119,000.
Manufacturing took a hit, perhaps less surprising after this week’s ISM report:
The goods-producing sector shed a total of 3,000 jobs in May. Although construction payrolls rose by 5,000 in May, on top of an increase of 8,000 jobs in April, the manufacturing industry recorded a total loss of 6,000 jobs in May.
CNBC warns of a summer slowdown with this big miss on ADP:
Private-sector job creation was weaker than expected in May, as the economy struggled to break free of what appears to be a summer slowdown on the horizon.
ADP and Moody’s Analytics reported just 135,000 new positions for the month, below expectations of 165,000. …
The poor showing sets the stage for a possibly weak nonfarm payrolls report on Friday, when the Labor Department had been expected to show 169,000 new jobs.
Economists sometimes will use the ADP numbers to adjust their estimates for the government account, even though the private-sector count has been a historically unreliable gauge.
That’s true, but when ADP misses, it almost always overshoots the BLS report. Normally, I’d apply a 60-80% factor to the ADP report when it comes to predicting the official numbers. That would suggest a range from 81K-108K for the BLS report, far below the ~150K the US economy needs to keep pace with population growth. If that’s the result, it would either mean that the unemployment rate will rise, or more likely, that the workforce participation rates will drop again from their current generational lows.
On the other hand, Gallup’s Job Creation Index report looks much sunnier:
Gallup’s U.S. Job Creation Index increased to 22 in May, the highest score for any month since April 2008.
The Job Creation Index is now much improved from the all-time monthly low of -5 recorded in February and April 2009.
The net job creation score is based on 37% of workers telling Gallup that their employer is hiring new people and expanding the size of its workforce, and 15% saying their company is letting people go and reducing the size of its workforce. The percentage “hiring” is the highest since August 2008 and the percentage “letting people go” is the lowest since March 2008.
This is an indirect measure, however. Gallup will have its direct measures on job creation out tomorrow, which mirror the BLS methodology. There is at least some correlative corroboration for the conclusion that terminations have slowed, however, in the weekly initial jobless claims series, which has slowly dropped back into a range that approaches a correlation with significant job growth.
Back to pessimism from the NFIB:
Small businesses cut back on staff slightly in May, the first decline in six months and a sign of weakness in the job market recovery.
The National Federation of Independent Business said on Wednesday employment shrank by 0.04 workers per firm last month.
Which is correct? We’ll see what Gallup says tomorrow and the BLS on Friday, but based on manufacturing numbers, I’d tend toward the pessimistic ADP report. Meanwhile, this chart from Business Insider doesn’t look promising, either.