Strong Private Sector Jobs Report Raises Expectations
- The May ADP Employment Report showed a strong 253,000 net gain in private sector jobs.
- The ISM Manufacturing Index inched up to a positive 54.9 in May.
- Initial Claims for Unemployment Insurance increased by 13,000 for the week ending May 27, to hit 248,000.
- Construction Spending in April dipped by 1.4 percent.
Labor market indicators are in good shape heading into tomorrow’s official Bureau of Labor Statistics employment report for May. This is important because good labor data supports expectations that the Federal Reserve will raise the fed funds rate range by 25 basis points on June 14. The private ADP National Employment Report for May showed a net gain of 253,000 private sector jobs for the month. Adding about 10,000 for government sector employment gives us an estimate of 263,000 net new payroll jobs for the official BLS tally. Our initial estimate of May payroll job gains was 180,000, so today’s ADP data shows sizeable upside risk to that initial estimate. Noteworthy in the ADP data were gains in goods-producing industries. Construction employment was up by 37,000 jobs for the month. Manufacturing employment was still solid, gaining 8,000 for the month. Natural resources/mining employment was up by 3,000 jobs. Trade/transportation/utilities added 58,000 jobs. The service sector was also strong. Professional/business services employment was up by 88,000. Education/health services employment increased by 54,000.
Initial claims for unemployment insurance increased by 13,000 for the week ending May 27, to hit 248,000, staying in the very low range where they have been since the first of the year. Continuing claims fell by 9,000 for the week ending May 20, to hit 1,915,000. Continuing claims are still trending downward, showing that companies are holding on to their workers, and that laid off workers are able to find new jobs quickly.
Construction spending in April dipped by 1.4 percent, consistent with the decline in housing starts for the month. Spending on private residential construction eased by 0.7 percent as the multifamily component eased. Spending on private non-residential projects was down by 0.6 percent, with most sub-categories down for the month. Spending on public construction projects dropped by 3.7 percent, with most sub-categories down.
Manufacturing conditions remain positive and improving. The Institute of Supply Management’s Non-Manufacturing Index inched up from 54.8 in April to 54.9 in May. The new orders, production and employment sub-indexes were all in positive territory. Anecdotal comments were favorable with some industries reporting pricing pressure on commodities. Fifteen out of 18 industries reported growth. Only apparel/leather and textile industries reported contraction in May.
Market Reaction: U.S. equity prices opened with gains. The yield in 10-Year T-bonds is up to 2.22 percent. NYMEX crude oil is up to $48.65/barrel. Natural gas futures are down to $3.00/mmbtu.
For a PDF version of this Comerica Economic Alert click here: ADP_06012017.