US May Employment Report: A Preview

Tomorrow, the BLS will publish May Employment report and it will give more details regarding the labor market situation. The Bloomberg consensus expects nonfarm payrolls and unemployment rate to be unchanged from April at respectively 165 K and 7.5%.


It will be very difficult for economists to anticipate nonfarm payrolls to the extent that proxys showed mixed signals:


1/ (+) During the survey period (2nd week of May), the four-week moving average of initial claims decreased from 362 K (previous survey period) to 340 K.


2/ (+) On the same period, continuing claims also fell from 3007 K in April to 2923 K in May.


3/ (+) The confidence surveys which are linked to labor market situation improved significantly in May:
- The University of Michigan and the Conference Board surveys increased respectively by 8.1 pts to 84.5 (highest level since July 2007) and 7.2 pts to 76.2 (highest level since February 2008).
- Note that “Employment” component of the Conference Board (Hard to get a job minus Plentiful) rose from -27.2 in April to -25.3 in May.


4/ (+) Beige Book noted hiring still increased at a measured pace:

Hiring increased at a measured pace in several Districts, with some contacts noting difficulty finding qualified workers.


5/ (+) According to Challenger, the number of planned layoffs at U.S. firms fell in May for the third month. Employers announced 36,398 job cuts last month, down 4.5 percent from 38,121 in April, according to the report from consultants Challenger, Gray & Christmas. May’s layoffs were also significantly lower than what was seen a year ago, down 41.2 percent from last May’s 61,887.


6/ (+) Intuit Survey showed that small businesses hired the most since January 2012.


7/ (-) ADP report said that large firms hired less than small firms. Private sector only hired 135 K in May.


8/ (-) In May, both Manufacturing and Services “Employment” components were down from April confirming that large firms hired less than in April.


9/ (-) Online advertised vacancies fell 150,200, or 3 percent, in May to 4,827,600 in The Conference Board Help Wanted OnLine Data Series.


10/ (-) Gallup’s seasonally adjusted U.S. unemployment rate for May was 8.2%, up from 7.8% in April. Gallup calculates its seasonally adjusted employment rate by applying the adjustment factor the U.S. government used for the same month in the previous year.


These data sent mixed signals nevertheless it seems that hirings were stronger at the beginning of the month when the survey was conducted. Indeed, weather was milder and we could expect hirings in the retail and construction sectors to be well oriented. Small firms will also add more people in May. So, despite some negative signals this week, a positive surprise can’t be excluded.