May Employment Preview
On Friday at 8:30 AM ET, the Bureau of Labor Statistics (BLS) will unveil the employment report for May. Analysts expect an addition of 130,000 jobs, while the unemployment rate is forecasted to remain steady at 4.2%. In April, 177,000 jobs were added, with the unemployment rate also at 4.2%.
Goldman Sachs Insights
According to Goldman Sachs, the employment component of the ISM services index has shown improvement, yet it remains at a weak level. Additionally, the ADP measure of job growth fell short of expectations. Consequently, they have revised their forecast for nonfarm payroll growth down by 15,000 jobs to 110,000, which is below the consensus of 126,000.
BofA Predictions
BofA anticipates that payrolls will increase by a stable 150,000, slightly exceeding consensus expectations of 130,000. Despite a muted level of claims during the survey week, firms seem to have paused hiring in trade and transportation sectors following previous months' increases driven by front-loading. They suggest that uncertainty regarding tariff policies is preventing firms from starting to shed workers.
ADP Report Overview
The latest ADP employment report revealed that only 37,000 private sector jobs were added in May, significantly below consensus forecasts. Historically, ADP data has not been the most reliable predictor of the BLS report outcomes.
ISM Surveys Analysis
The ISM indexes, which are diffusion indexes based on firms hiring, indicate a mixed employment landscape. The ISM® manufacturing employment index rose slightly to 46.8% from 46.5% the previous month, suggesting some job losses in manufacturing, corroborated by the ADP report indicating 3,000 manufacturing jobs lost.
Conversely, the ISM® services employment index improved to 50.7% from 49.0%, suggesting an addition of jobs in the services sector, with the ADP report indicating 36,000 service jobs added in May.
Unemployment Claims Update
The weekly claims report showed initial unemployment claims were relatively stable at 226,000 in May, compared to 216,000 in April, indicating that layoffs have remained consistent or slightly increased.
Conclusion
Over the past year, employment gains have averaged 157,000 jobs per month, reflecting trends prior to recent policy changes. It may still be early for these policies to significantly impact employment reports. However, there are indications of hiring hesitancy due to policy uncertainty, leading to speculation that the actual job growth may fall short of expectations for May.
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