April Employment Preview

Wednesday: ADP Employment, Trade Deficit, ISM Services

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by Calculated Risk on 5/05/2022 09:35:00 AM

On Friday at 8:30 AM ET, the BLS will release the employment report for April. The consensus is for 400,000 jobs added, and for the unemployment rate to be unchanged at 3.6%.There were 431,000 jobs added in March, and the unemployment rate was at 3.6%.Click on graph for larger image.

o First, currently there are still about 1.6 million fewer jobs than in February 2020 (the month before the pandemic).

This graph shows the job losses from the start of the employment recession, in percentage terms.

The current employment recession was by far the worst recession since WWII in percentage terms. However, the current employment recession, 25 months after the onset, has recovered quicker than the previous two recessions.

o ADP Report: The ADP employment report showed a gain of 247,000 private sector jobs, well below the consensus estimates of 395,000 jobs added. The ADP report hasn’t been very useful in predicting the BLS report, but this suggests a weaker than expected BLS report.

o ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires). The ISM(R) manufacturing employment index decreased in April to 50.9%, down from 56.3% last month. This would suggest 15,000 jobs lost in manufacturing employment in April. ADP showed 25,000 manufacturing jobs added.

The ISM(R) Services employment index decreased in April to 49.5%, down from 54.0% last month. This would suggest a 60 thousand increase in service employment in April. Combined, the ISM indexes suggest employment well below the consensus estimate.

o Unemployment Claims: The weekly claims report showed an increase in the number of initial unemployment claims during the reference week (includes the 12th of the month) from 177,000 in March to 185,000 in April. This would usually suggest a few mort layoffs in April than in March, although this might not be very useful right now. In general, weekly claims were at expectations in April.

o Permanent Job Losers: Something to watch in the employment report will be “Permanent job losers”. This graph shows permanent job losers as a percent of the pre-recession peak in employment through the January report.

This data is only available back to 1994, so there is only data for three recessions. In March, the number of permanent job losers decreased to 1.392 million from 1.583 million in the previous month.

These jobs will likely be the hardest to recover, so it is a positive that the number of permanent job losers is declining fairly rapidly.

o COVID: As far as the pandemic, the number of daily cases during the reference week in April was around 30,000, down slightly from around 33,000 in March. This is neutral for the April report.

o Seasonality: Over the last 15 months, the economy has averaged 562,000 jobs added per month. The only month below 400,000 in the last 15 months was April 2021.

In April 2021, the consensus was for 978,000 jobs added, and the BLS reported 266,000 jobs added (a large miss). It is possible there is a seasonal impact from the 20+ million jobs lost in April 2020 (although the BLS is trying to remove that impact in their seasonal adjustments).

o Conclusion: The consensus is for job growth to slow to 400,000 jobs added in April. Overall, the ADP report was below expectations, the ISM employment surveys were weak, and unemployment claims was mostly neutral during the reference week. This suggests a weaker than expected employment report for April.