May’s employment data is released at 8:30. Consensus is expecting a 4.9% unemployment rate, a 200k and 195k increase in non-farm and private sector payrolls, respectively, a 0.3% increase in average hourly earnings, a 34.5 hour workweek and a 63.0% labor participation rate.
To write the incredibly obvious, the markets will trade off this data, forming broad based conclusions, conclusions that will be tainted by one’s confirmation biases and preconceived notions.
As noted many times, a sudden collapse in hiring seems unlikely as jobless claims have been below 300,000—considered consistent with a healthy labor market—for the longest stretch since 1973. However, what is different this time is the labor participation rate (LPR).
The LPR has risen for six consecutive months—the longest stretch since 1992—and is at the highest level since March 2014. This is indicating a stronger labor market as improving jobs prospects are pulling discouraged people into the workforce but the LPR is considerably lower than the 67% level regarded as “healthy.”
There are low expectations of an “upside” surprise given the ADP survey, however as noted many times the correlation between ADP and BLS is widening each month.
Yesterday markets were quiet waiting for today’s data.
Last night the foreign markets were down. London was down 0.99%, Paris down 1.36% and Frankfurt down 0.77%. China was down 2.82%, Japan down 0.25%, and Hang Sang down 1.66%.
The Dow should open nominally lower but this could change radically given the significance of the labor report released at 8:30. The 10-year is unchanged at 1.75%.
Ken Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.