ADP report predicts May private-sector jobs growth at 133K, weekly jobless claims jump 10K

Tomorrow, the Bureau of Labor Statistics will release the latest official jobs figures, one of the most closely-watched economic indicators from the federal government.  One predictive indicator of the direction that report will take is the monthly analysis from payroll-processing giant ADP, which uses its clients as a sample to predict job non-government growth.  Today’s report hints at continued mediocrity — at best:

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Employment in the U.S. nonfarm private business sector increased by 133,000 from April to May on a seasonally adjusted basis. The estimated gain from March to April was revised down modestly, from the initial estimate of 119,000 to a revised estimate of 113,000.

Employment in the private, service-providing sector increased 132,000 in May, after rising a revised 119,000 in April. Employment in the private, goods-producing sector increased 1,000 in May. Manufacturing employment dropped 2,000 jobs, the second consecutive monthly decline.

Employment on large payrolls—those with 500 or more workers—increased 9,000 and employment on medium payrolls—those with 50 to 499 workers—rose 57,000 in May. Employment on small payrolls—those with up to 49 workers—rose 67,000 that same period. Of the 57,000 jobs created by medium-sized payrolls, 2,000 jobs were created by the goods-producing sector and 55,000 jobs were created by the service-providing sector.

Construction employment fell by 1,000 in May, its second consecutive decline following six monthly advances that likely were driven in part by unusually warm weather during the winter months.

That’s going to disappoint some analysts today, including those at CNBC:

Private-sector jobs growth came in at a disappointingly weak 133,000 from April to May, according to a report from ADP and Macroeconomic Advisors that adds to a bleak outlook for employment. …

Economists had expected the report to show nongovernment jobs grew by 150,000.

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Usually (although not always), the ADP numbers overshoot the BLS estimation for job creation.  The BLS will also take into account the public sector, which has been shrinking steadily since the peak of 2010 in stimulus and Census spending.  Even if ADP makes a dead-on call in the private sector, we’re looking at something less than 133K in net job growth, which would barely keep pace with population growth.

However, that’s not the only indicator we have for tomorrow’s numbers.  According to another analysis from Wall Street, layoffs jumped 53% in May, which means that ADP’s figures are hopelessly optimistic:

Job cuts jumped by 53 percent in May from April in the United States, with Hewlett-Packard’s layoffs propelling the computer industry to the top spot among the biggest job cutters this year, a report by consultancy firm Challenger, Gray & Christmas showed on Thursday.

Employers announced plans to cut 61,887 staff from their payrolls in May, 67 percent more than in the same month of last year. The figure represents the most job cuts since last September.

The computer industry got the worst of it, but they weren’t the only sector to get hit hard:

Another area to watch is the food industry, where job cuts are up 75 percent this year and where Hostess Brands – markers of Twinkies and Wonder Bread – filed for Chapter 11 bankruptcy protection, the report said.

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Right on top of that, the Department of Labor reports a 10,000-claim jump in initial weekly jobless claims:

In the week ending May 26, the advance figure for seasonally adjusted initial claims was 383,000, an increase of 10,000 from the previous week’s revised figure of 373,000. The 4-week moving average was 374,500, an increase of 3,750 from the previous week’s revised average of 370,750.

The advance seasonally adjusted insured unemployment rate was 2.6 percent for the week ending May 19, unchanged from the prior week’s unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending May 19 was 3,242,000, a decrease of 36,000 from the preceding week’s revised level of 3,278,000. The 4-week moving average was 3,263,750, a decrease of 12,000 from the preceding week’s revised average of 3,275,750.

Note that last week’s numbers got revised upward for the 62nd time in 63 weeks, or the 63rd time in 64 weeks.  Honestly, I’ve lost count.  This still is in the same statistical ballpark as most of the rest of the year, but it just went in the wrong direction at the same time as a host of other negative indicators appeared.  That will leave a mark.

If we come in less than the population-growth expansion level in tomorrow’s numbers, the Obama administration may need to start hitting the panic button.  They cannot go through another Wreckovery Summer and hope to win re-election — and for all practical purposes, voters will shortly start locking in their final impressions of the economy and its direction this summer.

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