November Employment Preview

On Friday at 8:30 AM ET, the BLS will release the employment report for November. The consensus is for an increase of 190,000 non-farm payroll jobs in November (with a range of estimates between 140,000 to 220,000), and for the unemployment rate to be unchanged at 3.7%.

Last month, the BLS reported 250,000 jobs added in October.

Here is a summary of recent data:

• The ADP employment report showed an increase of 179,000 private sector payroll jobs in November. This was slightly above consensus expectations of 175,000 private sector payroll jobs added. The ADP report hasn’t been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth close to expectations.

• The ISM manufacturing employment index increased in November to 58.4%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 25,000 in November. The ADP report indicated manufacturing jobs increased 4,000 in November.

The ISM non-manufacturing employment index decreased in November to 58.4%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased well over 200,000 in November.

Combined, the ISM indexes suggest strong employment gains.  This suggests employment growth well above expectations.

Initial weekly unemployment claims averaged 228,000 in November, up from 214,000 in October. For the BLS reference week (includes the 12th of the month), initial claims were at 225,000, up from 210,000 during the reference week the previous month.

The increase during the reference week suggests a weaker employment report in November.

• The final November University of Michigan consumer sentiment index decreased to 97.5 from the October reading of 98.6. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Merrill Lynch has introduced a new payrolls tracker based on private internal BAC data. The tracker suggests private payrolls increased by 211,000 in November, and this suggests employment growth somewhat above expectations.

• Looking back at the three previous years:

In November 2017, the consensus was for 190,000 jobs, and the BLS reported 228,000 jobs added.

In November 2016, the consensus was for 170,000 jobs, and the BLS reported 178,000 jobs added.

In November 2015, the consensus was for 190,000 jobs, and the BLS reported 211,000 jobs added.

It appears the consensus is frequently a little low for November.

• Conclusion:  These reports suggest a solid employment report in November, except for unemployment claims.     My guess is the report will be at or above the consensus.

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