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US June Employment Report: A Preview

Tomorrow, the BLS will publish June Employment report and it will give more details regarding the labor market situation. The Bloomberg consensus expects nonfarm payrolls to decrease by 10K in June to 165 K and unemployment rate to reach 7.5%, down from 7.6% in May.

 

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 June), the four-week moving average of initial claims increased from 340 K (previous survey period) to 348.5 K.
 
2/ (-) On the same period, continuing claims also rose from 2923 K in May to 2987 K in June.
 
3/ (+) The consumer confidence survey of Conference Board which is linked to labor market situation improved significantly in June. It increased by 7.1 pts to 81.4 (highest level since January 2008).
- Note that “Employment” component (Hard to get a job minus Plentiful) rose from -26.5 in May to -25.2 in June.
 
4/ (-) Employers announced 39,372 planned job cuts last month, up 8.2 percent from 36,398 in May, according to the report from consultants Challenger, Gray & Christmas, Inc. June’s layoffs were also up 4.8 percent from a year ago.
 
6/ (-) The small business index from Intuit showed 25,000 payroll jobs added in June, down from 35,000 in May.
 
7/ (+) ADP’s private payrolls jobs report shows a gain of 188,000 private sector jobs for June 2013 up from 134 thousand jobs in May.
 
8/ (+) In June, even if ISM Manufacturing “Employment” component was down from May to 48.7 (first contraction since Oct 2009), the trend was brighter in Services with employment component reaching its highest level since February 2013 at 54.7.
 
9/ (+) Online advertised vacancies rose 52,900 in June to 4,980,300, according to The Conference Board Help Wanted OnLine (HWOL) Data Series just released.
 
10/ (+) Gallup’s unadjusted unemployment rate for the U.S. workforce was 7.8% in June, statistically similar to the 7.9% in May, and the 8.0% in June 2012. Gallup’s seasonally adjusted U.S. unemployment rate for June, however, was 7.6%, down from 8.2% in May.
 
11/ (-) The National Federation of Independent Business said the net change in employment ticked down by 0.09 workers per firm after slipping 0.04 in May.
 
These data sent mixed signals nevertheless it seems that hirings were weaker in manufacturng sector and stronger in services. My feeling is that the climate was milder in June which could be a boost both for catering, leisure and also construction. As a consequence, I expect a slight improvement in nonfarm payrolls and a number above the consensus.

Delaying ObamaCare Insurance Mandate Should Boost Small Businesses Hiring

The Obama administration announced Tuesday that it is delaying a major provision in the health care overhaul, putting off until 2015 a requirement that many employers offer health insurance. The mandate was originally set to kick in for 2014, but will now start in 2015.

 

The law requires companies that employ 50 or more workers to offer coverage or face fines. The Treasury Department and the White House said that, based on complaints by employers that the system for reporting the coverage was too onerous, they would simplify that system and give employers an additional year to comply.

 

The decision effectively means that penalties that would have been assessed against non-compliant businesses will be delayed until 2015.

 

Note this announcement intervened while few days ago, a new study by Newtek Business Services showed that independent business owners were still confused over the coming healthcare law regulations.

 

More from Newtek Business Services:

 

Based on a poll of over 1,000 respondents, one of the key findings from the June SB Authority Market Sentiment Survey is that 52% of business owners do not know how to prepare for the upcoming healthcare reform changes. Of the remaining, 24% plan to reduce benefits to employees, 13% plan to rebid their policy and 11% plan to reduce business expenses.

 

Moreover, Remind that on June 19, CNBC underlined that:

 

Small business owners’ fear of the effect of the new health-care reform law on their bottom line is prompting many to hold off on hiring and even to shed jobs in some cases.
 
Forty-one percent of the businesses surveyed have frozen hiring because of the health-care law known as Obamacare.

 

Therefore, in the short term, delaying ObamaCare will give small businesses more time to be in conformity with the law and to manage its impact. At least, they could stop firing people which will be a boost for NFP to the extent that small businesses add the majority of jobs, according to ADP:

 

Businesses added 188,000 jobs in June, according to the ADP National Employment Report, up from 134,000 jobs added in May.
 
The biggest gains were among small businesses, which added 84,000 jobs in June. Medium-sized firms added 55,000 positions, while large companies — those with more than 500 employees — added 49,000 jobs.

ADP Showed Private Sector Employment Increased by 135 K in May

Automatic Data Processing reported that private sector employers added 135 K in May up from a revised figure of 133 K in April. Regarding sectors goods-producing cut jobs (-3K ) for the first time since April 2012 while service-providing sector added 138 K jobs (41st straight month increase). In the details, note that manufacturing cut 6 K jobs which confirms the weakness of US factories whereas construction firms hired 5 K people showing that the recovery is still on track in the real estate market. Concerning firms size, small companies the most with 58 K strengthening the results of Intuit survey.

 

More from ADP:

 

“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.

 

The goods-producing sector shed a total of 3,000 jobs in May. Although c onstruction 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. Service-providing industries added 138,000 jobs in May, an improvement over the April gain of 113,000. However, the gains in May are below the average monthly gain of 156,000 during the first quarter. Among the service industries reported by the ADP National Employment Report, professional/business services added 42,000 jobs added over the month, more than twice as many as in April. Trade/transportation/utilities recorded a gain of 31,000 jobs, while financial activities added 7,000 jobs.

 

This was below the Bloomberg consensus of 169 K. ADP was not very useful to predict nonfarm payrolls figures, yet, it suggest that employment situation in May was slightly better than in April.