The May Employment Situation Report Showed Some Weakness
The June Report Should Rebound - Could Be Best June Ever
The May Jobs Report, or Employment Situation Report, was a disappointment with regard to both the Current Employment Statistics (CES) worker data and with regard to the Current Population Survey (CPS) Jobs and Unemployment Data. We were growing at over 2% annually, according to the Non-Seasonally Adjusted (NSA) CES data, between October 2018 and January 2019. Last Month we recorded the most full-time jobs ever, per the CPS data. We had the lowest May U-3 Unemployment Level, NSA, since May 1979. What can we expect from the two data sets this month?
How Fast Can we Grow? This is a trick question. How fast can we grow month to month? How fast can we grow June to June? We added 1.048 million NSA CES private Sector Jobs during 2017, 1.091 million during June 2018, and 1.099 million during June 2016. You did not hear this because the headline number is the Seasonally Adjusted (SA) Non-Farm Payroll (NFP) number. The NFP number includes Government Jobs and Government jobs normally fall during June. The growth rate, in percentage terms, were 1.79% during 2017, 1.90% during 2018, and 1.96% during 2016. The problem is that last month that value dropped to 1.72% for May 2019. The good news is that the June growth rate is often significantly higher than the May growth rate. If we grow between 1.72% and 1.79% then we should add 150,000 to 238,000 SA private sector workers. If we grow between 1.79% and 1.90% we could grow by 238,000 to 378,000 workers. This wide range of annual growth rates is similar to what was observed in the June to June Private Sector Payroll Growth rates in "June ADP Should Bounce Back from Weak May."
June to June Growth Should be Recorded in all Sectors, Including Information Technology.The Largest non-seasonally adjusted June to June growth rates, in percentage terms, should be in Mining and Logging (M/L,) Construction, Leisure and Hospitality (LAH,) Professional Business Services (PBS,) and Education and Health Services (EHS.)
June to June Seasonally Adjusted Growth should be reported in all sectors. The seasonal factors used change the order of the sectors that should see the largest growth. Mining and Logging, Construction, PBS, Manufacturing and EHS should grow the fastest compared to last June.
May to June growth, non-seasonally adjusted should be much better than May - adding over 1 million non-seasonally adjusted private sector workers. All sectors, including IT, should grow June to June. The largest gains are expected in M/L, Construction, LAH, PBS, and EHS. June is a strong hiring month. We should well exceed the 0.72% recorded during May. We should grow 0.80% to 0.90%. The month to month growth is projecting a slower addition of workers, coming between 87,000 and 202,000 workers. This range overlaps entirely with the annual growth projections. Normally this means that the data will come in on the low side because the month to month growth impacts the annual growth rate and the annual growth rate has been dropping since January. The best bet is that the SA CES private Sector data will come in between 150,000 and 202,000 workers, depending upon the seasonal factor(s.)
Seasonally Adjusted CES worker should report a drop in Government Workers, possible drops in Mining and Logging, Other Service, and IT. We should see the strongest percentage growth in M/L, EHS, PBS, Manufacturing and LAH.
The Seasonal Factors used during June is a crap shoot. The higher the seasonal factor the higher the seasonally adjusted data will be reported. The seasonal factors change month to month, year to year, and sector by sector. If we grow at the same rate that we did during June 2018 and the same seasonal factor is used then we should see 151,000 private sector workers being added this month. It could be reported as low as 125,000 if the seasonal factor from June 2016 is used, and possibly as high as 200,000 workers if the June 2016 seasonal factor is used.
Watch the revisions. The non-farm payroll datarevision tables are readily available. It appears that there should be a modest upward revision between 8,000 and 21,000 non-farm payroll workers, including Government Sector workers. Remember that when the May 2016 data was released the April data was revised down 37,000 workers so that the May data could reported a gain of 38,000 workers. Last month the headline SA NFP number was 75,000. If this is revised up to 96,000 then a potential 200,000 headline private sector number might be reduced to 179,000.
We will add rough 1 million non-seasonally adjusted workers. The June to June data looks like green arrows across the board, non-seasonally adjusted and seasonally adjusted. The strongest growth is expected in some of the sectors with the most job openings: PBS, EHS, and LAH. We are also expecting the largest growth rates in Construction and the Mining/Logging sectors. What is going to happen with regard to the CPS Jobs data?
We have been climbing a jobs mountain. Normally we hit peak jobs during July, and sometimes it comes closes or exceeds the July data during the Christmas Holiday Hiring Push. We had a record level of combined full-time and part-time jobs this May. "All" recession are jobs recessions. June is traditionally a month where full-time jobs are added and part-time jobs are trimmed. Unemployment can tick higher as people respond to the CPS survey question saying that they are out of work and looking for work. What can we expect this month?
Expect 1 million non-seasonally adjusted full-time jobs to be created. Currently we have 130 million full-time jobs, 27 million part-time jobs, and 5.503 million unemployed workers. Normally we grew at 1.00% to 1.25% during June for the years prior to the Great Recession. We have been growing roughly 0.85% to 0.99% during June during the past three years. If we grow at 1% then that is 1.3 million new full-time jobs. We added 1.3 million and 1.4 million full-time jobs during 2016 and 2017. Remember that 2016 was the Summer before the Presidential and Congressional elections.
Non-Seasonally Adjusted Part-time jobs should be trimmed by 1% to 3%. This means that the number of part-time jobs could drop by 270,000 to 800,000 part-time jobs. If we "only" add 1 million, and not 1.3 or 1.4 million, full-time jobs and we lose 800,000 part-time jobs, that is still a gain of 200,000 jobs and another record month for total jobs. We could also have a net gain of over 1 million jobs if 1.4 million FT jobs are created and only 270,000 part-time jobs lost.
Month to month the Unemployment level may drop 1% and is more likely to increase by up to 3%. This means that the unemployment level could fall by 500,000 or increase by up to 1.5 million workers. If it drops then we would see a drop of 200,000 to 400,000 workers. We have seen surges in U-3 Unemployment of rough 900,000 to 1.1 million during 2001, 2012, 2013, 2016 and 2018. This was not reported because it is the non-seasonally adjusted data. The seasonally adjusted data often decreases, and the non-seasonally adjusted data normally increases during June.
The Annual Data is looking for an increase in participation, a spike in full-time jobs, and a drop in both part-time jobs and unemployed workers. Last year we had 129.9 million FT jobs, 26.5 million PT jobs and 6.8 million U-3 workers. Full-time jobs could grow at a 2.0% to 2.25% rate. If we grow by 2% we would hit 132.5 million FT Jobs, up 2.5 million jobs. We have not done that since the 1980s. The annual data is looking for a drop of 0.75% to 1.0% from last year's 26.5 million to 26.325 or 26.400 million. This would be a drop of 600,000 to 7000 part-time jobs. Unemployment should drop between 6% and 16% from Last Year's level. That would place us at 5.72 million to 6.4 million. This would mean an increase of 200,000 to 900,000 unemployed workers. This means that we probably should expect an increase of 675,000. An increase in unemployment with an increase in employment means an increase in participation. The Non-seasonally adjusted participation rate can spike 0.7% to 1.2% during June.
What does this mean for the rest of the data? If workers grow as much as anticipated, and wages grow in excess of 3%, we could see record June wages across the board and record June Income. Record June income should mean a boost in retail sales and a boost to the 3rd month of the Second quarter GDP. Worker and wage data will be covered in an individual column.
Men and Women should see record levels of jobs this month and next month. The spike in Construction, mining and logging, and manufacturing jobs will traditionally boost more men than women. Men work more full-time jobs and more dual full-time jobs than women. Women work more part-time jobs and more dual part-time jobs than men. This could negatively impact the number of women working in the workforce. Men and women work a comparable number of FT PT jobs. This will be covered in a separate article.
Could we see a drop in Job Openings reported for the month of May? June? May was weak. Job opening may rise because so few workers were hired. Remember that the JOLTS job openings data is a different survey than the CES worker data and that it lags the Jobs Report by one month. The JOLTS data is not comparable to the CPS jobs and unemployment data. No matter what you hear or read the JOLTS Job Openings data and the CPS U-3 unemployment data have no relationship. Zero. It doesn't matter if we have more job openings than unemployed workers. The JOLTS data does not have any information on full-time or part-time jobs.
How is President Trump doing compared with his predecessors? We know that President Trump and Former President Clinton are the only two Presidents that have trimmed unemployment and grown FT jobs during their first 28 months in office. President Trump has added more full-time jobs than Clinton. Former President Clinton has added more total jobs than President Trump due to a surge in Part-time jobs. The FT Job creation during June of 1995 was over 2 million while more than 1 million PT jobs were cut. This is month 29. Will President Trump net 1 million job gains? This will be covered in the "Five Presidents" article.
This jobs report should be a solid jobs report. We should see Annual improvement in Workers, Jobs, and Unemployment. We should see growth. The question is how will it be received? There will be some confused by the boost in participation with "relatively weak" "jobs" data. The Jobs data will be stronger. The workers data will be strong and reported as not so strong. We will continue climbing the non-seasonally adjusted jobs mountain this month.
It's the economy.
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