Previewing Tomorrow's Payroll Number

Tyler Durden's picture

With a 9 standard deviation range between the highest and lowest excuse for a forecast from the 81 "qualified" economists on Bloomberg's survey, there is plenty of room for noise to dominate signal with tomorrow's payrolls data. Goldman forecasts a softer-than-consensus 210k increase in non-farm-payrolls as May employment data flow looks more mixed, and they expect that the unemployment rate rose two-tenths to 6.5% in May (vs. consensus 6.4%). Average hourly earnings (AHE) are likely to be in focus again following several months of heightened attention to wage growth and labor market slack; Goldman expects an increase of 0.2% in May (vs. consensus 0.2%).


Recent employment data has been mixed... (and today's dismal Challenger Layoffs data)...


And Goldman is less exuberant than many on the street...

We forecast a 210k increase in nonfarm payrolls in May, a touch below the consensus estimate of 215k. We expect that private payrolls increased 210k (vs. consensus 210k), with government a neutral contributor. This would mark a substantial decline from April's better-than-expected 288k gain. The reason for our more modest expectations for May is that the employment data have been considerably more mixed this month after pointing almost uniformly to a stronger number in April. As a result, we expect this month's gain to fall somewhere in between the 6-month (203k) or 12-month (197k) moving average and the roughly 225k trend rate we expect as growth accelerates this year. Based on May data from recent years, we also see some risk of a net downward revision to the prior two months.


Arguing for a stronger report:

  • The employment components of business surveys sent a mixed-to-positive overall message this month. Among manufacturing surveys, the ISM (-1.9 to 52.8) and Dallas Fed (-16.8pt to 2.9) surveys declined, but the Philly (+0.9pt to 7.8), Empire (+12.7pt to 20.9), Richmond (+6pt to 10), and Kansas City (+7pt to 10) Fed surveys improved. Among service sector surveys, the employment components of the ISM non-manufacturing (+1.1pt to 52.4) and New York Fed (+10.3pt to 16.4) surveys improved, while the Richmond (-2pt to 4) and Dallas (-2.6pt to 13.8) surveys declined. The Beige Book also reported "steady to stronger" hiring in almost all districts.
  • The labor differential?the difference in the percentage of respondents in the Conference Board's consumer confidence survey describing jobs as plentiful vs. hard to get?improved 1.6pt to -18.2 in May. The index has shown a fairly steady recovery since late 2011, but was a misleading indicator last month, when it fell 2.2pt.


Arguing for a weaker report

  • Private job gains reported by ADP disappointed consensus expectations this week at 179k in May, down from an initially-reported April gain of 220k. That said, we attach only limited weight to the ADP report because its initial print has yet to prove itself as a reliable indicator of payroll job growth as measured by the Labor Department.
  • Announced layoffs rose about 25% in May on a seasonally-adjusted basis, according to Challenger, Gray, and Christmas, with the largest cuts coming in the computer industry. As in April, job cuts in the health care sector remained at a normal level, suggesting little impact from layoffs of temporary workers after the end of the sign-up period for health insurance under the Affordable Care Act.

Neutral indicators

  • The four-week moving average of initial claims for unemployment benefits increased slightly from the April to the May reference week. However, the April weekly data might have been distorted by the Easter holiday and spring break from schools, and the difference between the two months was relatively small.
  • New and total online job ads fell a touch in May. Both series have been fairly stable over the last few months relative to their usual volatility, and we therefore view this as a neutral indicator. The Help Wanted OnLine report noted weaker demand for workers in sales, management, and computing, but increases in transportation, production, and construction job ads.
  • Weather conditions returned to seasonal norms in April and were a bit more supportive than usual in May.


We expect that the unemployment rate rose two-tenths to 6.5% in May (vs. consensus 6.4%), following an unexpected four-tenths decline to an unrounded 6.28% in April. The reason is that we expect the participation rate will partially reverse last month's unusually large four-tenths decline. Building on our decomposition of non-participators into the retired, disabled and other categories shown in the household survey micro data, we find that the 'other' category contributed most of the decline in participation in April.


At the margin, this might point to a larger retracement of last month's decline because--as researchers who use the household survey often note--survey respondents sometimes confuse unemployment with being out of the labor force for other reasons (the marginally attached are a subset of this category). To test this possibility, we model the change in the share of non-participators with a constant and last month's change. We find a tendency for about one-quarter of the change to reverse, but when we replace last month's total change with the changes in the three components of non-participation, we find that the effect is driven by changes in the 'other' category.


Average hourly earnings (AHE) are likely to be in focus again on Friday following several months of heightened attention to wage growth and labor market slack. We expect an increase of 0.2% in May (vs. consensus 0.2%). Wage data released over the last few months have remained soft, and qualitative evidence from yesterday's Beige Book also noted subdued wage growth. AHE for all workers grew just 0.1% in March and were flat in April. The Employment Cost Index showed compensation growth of 1.3% (annualized) and wage & salary growth of 1% (annualized) in Q1, while the national accounts data showed 2.3% (annualized) growth of compensation per hour in the nonfarm business sector in Q1. Our wage tracker--a smoother aggregate of all three wage measures--grew 1.8% over the past year.

Here is the full distribution - with Lavorgna actually slightly below consensus also...

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I MISS KUDLOW's picture

doesnt matter any more

AccreditedEYE's picture

Exactly. Don't know why people waste their time.

max2205's picture

Just publish the made up numbers in January for the whole year and be done with it









........('(...´...´.... ¯~/'...') 


..........''...\.......... _.·´ 





Duffminster's picture

Cramer was saying in essence that fewer jobs are good for stock prices.

TheRideNeverEnds's picture

It matters a bit still:


beat - up .25%

concensus - up .50%

miss - up 1%

disabledvet's picture

Does anyone here ever wonder why the Mona Lisa is in the Louvre? I mean history really isn't that complicated folks.

It can be extraordinary though...

Osmium's picture

Nope.  But I did wonder why the Mona Lisa did not have any eyebrows.  But not now.

tom a taxpayer's picture

No, but I do wonder how Jerry Lee Lewis made this classic version of Mona Lisa.

For Jerry afficianados, a different verssion, slow, woozy, boozy start, but hang on til 2:45 when Jerry takes off!

peter4805's picture

They'll publish numbers that suit their agenda. Truth doesn't enter the picture.

Shed Boy's picture

Yup, as others have said. This stuff doesn't mean anything anymore. The numbers are fudged to the point of being useless information. Maybe it will rattle the markets for a few minutes, but then back to business as usual.

HUGE_Gamma's picture

beat / or miss ...the only number we can be certain on is S&P 500 1950 tomorrow

Duffminster's picture

Tommorrows old McDonalds Farm Payrolls Burger jobs report won't reflect the greatly diminished economic impact that predominantly low paying jobs and minimal if any benefits have on consumer spending, retail or GDP numbers going forward compared to the jobs lost during the recession.  Here is a link to a study that tells the story with data.

The problem is that despite the number of new jobs created (almost as many as were lost during the recession), the jobs are paying much lower wages and with less benefits. That means each new job created has only a fraction of the economic benefit that the jobs lost had on both consumers pocket books and the US economy as a whole.

So when the financial press gets excited about somewhat higher jobs numbers, keep in mind that the average wage and benefit package are substantially less than for those jobs lost during the recession. Economist don't usually weight these number in the mainstream headline reports we get. Based on the report entitled "The Low-Wage Recovery: Industry Employment and Wages Four Years into the Recovery (April 2014)", from the National Employment Law Project, I'd guess we are looking at about 65%. So when they print a non-farms-payroll number of 200,000 for new jobs added, then, based my estimate of 65% in economic impact of jobs lost pre-recission your looking at that having about the same economic impact that 130,000 jobs would have had pre-recession. Here are some highlights from that report. Basically, what's clear is that fast food has made up way too many of these jobs. We are not going to eat our way to a solid foundation nor flipping burgers into our 90's.

" Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.
Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.
Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.

Today, there are nearly two million fewer jobs in mid- and higher-wage industries than there were before the recession took hold, while there are 1.85 million more jobs in lower-wage industries.

Service-providing industries such as food services and drinking places, administrative and support services, and retail trade have led private sector job growth during the recovery. These industries, which pay relatively low wages, accounted for 39 percent of the private sector employment increase over the past four years. ..."

There is a lot more data I could point to but overall the employment situation remains grim and despite promises that the government would work with companies to incentive them to create and keep jobs in the United States, the outsourcing boom has continued unabated with virtually nothing done in government to slow this down.

g'kar's picture

No FED purchases tomorrow. Bad job numbers. Probably a down day tomorrow in preperation (H) for Mon/Tue $4.5 billion FED purchase.

Hindenburg...Oh Man's picture

Don't be so negative. I'm sure they will find a way to squeeze out a green finish on a low volume afternoon. In fact a poor jobs number will provide just the right dip to allow the markets to springboard to new highs. 

g'kar's picture

Flat or down tomorrow. Actually I shouldn't even make these observations, I don't play.

nosoeawe's picture

Same govt lackies that said DDT and Abestos was safe, same govt liars that said Quantitative Easing is good for the economy, the same arrogant fed cunts who claimed there were WMDs in Iraq and the same group of rodents that said obozo wasn't born in kenya. 


The greatest fiction writer of all time is the united states federal government


Caviar Emptor's picture

Predict that May will have been the zenith of the post winter bounce. By Memorial Day things started sliding again and for June the trend has accelerated abruptly.

thismarketisrigged's picture

as many people have said above, it is irrelevant.


the market only cares about what the fed does/says, and it has been like that since 2009, but especially true since sept 2012.


they can announce 0 jobs added, market will be green by days end, or they can announce 500,000 jobs added, market will be green.


even when its red, the s&p is down 0.74 pts with the dow down 8 pts, and then the next 2 weeks is straight up.


this market is the biggest joke i have ever seen in my entire life.


zero volaitility, record fucking highs day after day on no volume and terrible economic conditions, at this point, i just laugh when the market goes up, because its such a fucking joke.

Luckhasit's picture

I will go ahead and my voice to the chorus, the numbers don't even matter anymore.  It'll be nice to see what they want the numbers to be.

All that matters is that the stock market goes up.  A better half time is figuring out who they will put on new dollar denominations.

tom a taxpayer's picture

1. Henry Merritt "HankPaulson, Jr. (born March 28, 1946) former CEO of Goldman Sachs and then served as the 74th United States Secretary of the Treasury.

2. Former House of Representatives by Financial Services Committee Chairman Barney Frank, and in the Senate Banking Committee by former Chairman Chris Dodd

walküre's picture

At some point they will print an unemployment rate of 4% or better with a negative GDP print. EBT recipients will have surpassed 75 million to match S&P 4000.

Disengage, disconnect, going dark, being self sustainable and raising kids outside the fabric is the only way to survive long term.

golfrattt's picture

Current Markets to a Jobs number is akin to your car going over a neighborhood speed bump at 60mph without feeling even a shimmy..

Liquidity > Gov't rData manipulated Chink style

GFORCE's picture

Even the NFP is just a pointless number now. We know it will be softer than consensus after the ADP but what does that mean? It means we make a soft rally in premarket, sell off at the open, then rally through the premarket levels to close near the new record-er highs.

AdvancingTime's picture

How do we reconcile the April jobs report that showed 288,000 jobs being created and 806,000 people dropping from the work force with economic reality?  My take on the recent jobs report is that as spring comes upon us ever optimistic and more desperate Americans are being pushed into making a decision as to whether to leave the work force or take a lower paying job that is often part time. Yes, people are busy scurrying around, but it should be clarified not at a fast pace. The question then arises as to how this will spill over to economic policy. More on this subject in the article below.