The May Seasonal Adjustment Prevented A Negative Payroll Number

Submitted by Southbay Research

Private Sector hits the pause button. Seasonal Adjustment prevents negative payrolls

  • Industrial Recession continues and spreading throughout the supply chain infrastructure
  • Private Sector non-industrial sectors have shifted to a wait-and-see hiring position
  • Consumer spending remains strong

The bad parts: It's no longer just an industrial recession

  • Transitory factors weaken payrolls ~55K (Construction down on highway hiring drop,Verizon drags down payrolls -35K)
  • Business activity slowdown is spreading: infrastructure (transportation, wholesale) and Temp worker hiring collapse
  • Seasonal adjustment factor boosted payrolls ~20K

The good parts: Consumer is alive and well

  • Retail hiring remains robust (YTD strongly ahead of last year)
  • Restaurants hired strongly (+22K)

* * *

Softer seasonal hiring turned the seasonal adjustment positive

Payrolls could have been negative without the boost from the adjustment factor
This in turn came from soft hiring in seasonally strong areas like Construction

Industrial Recession continues

Collapse continues in materials (-11K), machinery (-7K), metals (-4K) and is spreading to other areas: wholesale (-10K),

Goods Production -11K

•    Mining/Drilling cuts continue but the pace is slowing (as we expected)
•    Construction collapse we did not get right.  The shortfall is mostly in the Highway Construction segment (Heavy & Civil Engineering) and is likely transitory
•    Manufacturing as we expected

At the same time, the infrastructure parts of the supply chain are operating as if demand activity has peaked, if not slowed.

Wholesale -10K

Slightly softer than we forecast.  Reflects inventory saturation.  The semiconductor data has been reporting no growth in demand from their distribution channels and that is apparently reflecting conditions throughout the entire supply chain.

Transportation flattened (-1K)

Slightly softer than we forecast.  Rail and trucking (-3K) and support services (-3K) were the bigger factors 

And business activity has flatlined as companies shift to a wait-and-see hiring position

Employment Services (-19K)

Much worse than I forecast. 

Consumer spending remains steady

Retail solid (+11K) and YTD hiring remains stronger than last year
May hiring was a bit soft mostly due to front-loading in 1Q (as we expected). 

Leisure (+11K) soft due to some frontloading of hiring (as we expected) but restaurant hiring remains solid (22K) and points to continued mild growth in consumer spendin