Looking Ahead: A Jobs Setback in May?
Some early reports aren't pretty, but the government numbers have a way of surprising us
Officials in Washington may be bracing themselves today. Early indications suggest that Friday's unemployment report could be an ugly one. Throughout 2011, we've been provided mostly confusing data from the government jobs report. The two surveys it conducts have often disagreed on the status of the labor market. The sort of report we don't want to see, however, would be one clearly indicating that hiring has collapsed. Is that what we'll get for May?
Let's consider the early indicators we've got so far. Unemployment claims declined slightly in May, according to the Labor Department. The four-week average for claims as of the week ending May 28th was 425,500, which was 6,750 fewer than the four-week average ending April 30th. Average initial claims were lower in February and March, however.
Continuing claims also declined by 7,833 to 3.7 million for the three-week average ending May 21st (continuing claims isn't available for the prior week), compared to the four-week average ending April 30th. So this isn't great news, but it also isn't terrible -- if you assume that these numbers declined because those filing for unemployment benefits actually found jobs, and didn't just exit the job market temporarily.
A particularly weak hiring report (.pdf) came from payroll firm ADP this week. The firm says just 38,000 jobs were added to the private sector during the month of May. You can see in the chart to the right that this was a drastic drop from the 177,000 jobs added in April. Last month accounted for the fewest new jobs since September. It appears to indicate that the fairly promising hiring trend forming since October hiccuped last month. And remember, those 38,000 jobs only account for the private sector. If state and local governments continued to shed workers, as they have over the past several months, then the number of net jobs could be negative.
The picture doesn't improve much looking at the Challenger, Gray & Christmas report (.pdf) on planned layoffs. The firm reports that firings rose slightly, to 37,135 in May. As you can see from the chart, that's not terrible, but it also isn't as low as we've seen in some other months over the past year.
At this point, the market consensus predicts the government to announce 125,000 jobs added to the economy on Friday. It also expects the unemployment rate to drop to 8.9%, from 9.0% in April. That might sound strange, considering that the economy generally needs to add around 125,000 jobs each month just to keep up with the natural growth of the workforce. That allows the unemployment rate merely remain constant. But seasonality could have an impact here. Ultimately, we'll have to wait and see, as the government report has a way of both surprising and puzzling us. May's numbers may follow that rule.
Banner Image Credit: REUTERS/Brian Snyder