Today brings two bits of good news on the employment front, laying the groundwork for thinking positively about tomorrow’s jobs report for May. New jobless claims fell last week, the Labor Department advised, and nonfarm payrolls rose in May, according to the ADP National Employment Report. Are these positive changes a sign of things to come in the official employment report? We’ll have an answer in less than 24 hours.
Meantime, there’s a bit of statistical optimism to ponder as we wait. Nonfarm private employment rose 55,000 last month, according to ADP. That’s the fourth consecutive increase this year, albeit a modest downshift in the pace from April’s 65,000 gain.
The latest jobless claims numbers also show a change in the right direction, although the trend here is less convincing. As we’ve been discussing for months, new filings for unemployment benefits have been stuck in a range this year. The latest data point represents an improvement—new claims dropped 10,000 to 453,000 last week. But as the chart below reminds, we’ve been here before. The question is whether we’ll be here again in the weeks and months ahead?
It’s not unprecedented for jobless claims to move sideways for a time in the wake of a recession’s end. But at this late date, the failure for new claims to resume a downward trend raises doubts about the strength of the labor market’s recovery. All the more reason to hope for a strong number tomorrow.
The case for wishful thinking is compelling, according to the consensus forecast among economists for tomorrow’s official jobs report from the government. Dismal scientists expect that nonfarm payrolls will rise by a strong 500,000, according to Briefing.com. If true, the surge would be the biggest monthly gain since 1997, and well above April 2010’s rise of 290,000. More importantly, a 500,000 advance in nonfarm payrolls would tell the world that the U.S. labor market still has the power to expand at something more than a tepid pace.
The danger is that high expectations may bring a big disappointment if the forecast proves overly rosy. But the ultimate insider, at least, is telling us to keep the faith. “We expect to see strong jobs growth in Friday’s report,” President Obama said yesterday. “This economy is getting stronger by the day.”