Calculated Risk: November Employment Preview

by Calculated Risk on 12/07/2023 03:02:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for November. The consensus is for 200,000 jobs added, and for the unemployment rate to be unchanged at 3.9%.

There were 150,000 jobs added in October, and the unemployment rate was at 3.9%.

From BofA economists:

“Nonfarm payroll employment likely rose by 200k in November following a 150k increase in October. The main factor behind the acceleration relative to September is that two major strikes ended ahead of the November survey period. … On the household survey, we expect the labor force participation rate to be unchanged at 62.7% as we believe cyclical gains to participation rate are diminishing. Given this and our expectation for fairly strong employment growth, we forecast the unemployment rate to be unchanged at 3.9%, though there is a risk that it rounds down to 3.8%.”

From Goldman Sachs:

“We estimate nonfarm payrolls rose by 238k in November, above consensus … Alternative measures of employment growth indicate another month of robust job growth on average, government hiring likely remained strong, and layoffs remain low. … We estimate that the unemployment rate declined to 3.8%.”

ADP Report: The ADP employment report showed 103,000 private sector jobs were added in November.  This suggests job gains below consensus expectations, however, in general, ADP hasn’t been very useful in forecasting the BLS report.

ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index decreased in November to 45.8%, down from 46.8% last month.   This would suggest about 40,000 job lost in manufacturing. The ADP report indicated 15,000 manufacturing jobs lost in November.

The ISM® services employment index increased to 50.7%, from 50.2%.   This would suggest about 95,000 jobs added in the service sector. Combined this suggests job gains of 50,000 in November, below consensus expectations.

Unemployment Claims: The weekly claims report showed a larger number of initial unemployment claims during the reference week (the 5th through the 11th in November) from 200,000 in October to 235,000 in November.  This suggests more layoffs in November compared to October.

•  COVID: As far as the pandemic, the number of patients hospitalized during the reference week in November was around 13,000, down from 14,000 in October.  

•  Strikes: The CES strike report showed about 38,000 fewer workers on strike in November than in October.  This will boost employment by about 38 thousand in November.

Conclusion: Most of the key indicators suggest a weaker employment report in November than in October.   However, the end of the strikes will boost employment, but this is probably included in the consensus estimate.   My guess is the headline number will be below the consensus.

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