CNBCThe May jobs report is coming up at 8:30 AM ET.
According to Bloomberg, the consensus estimate for nonfarm payrolls added in May is 165K.
Deutsche Bank’s Joe LaVorgna thinks NFP will miss expectations and come in at 125K.
“May nonfarm payrolls tend to surprise the financial markets to the downside,” said LaVorgna. “Our best guess is that there is something fluky with the seasonal adjustment factors from the Bureau of labour Statistics which in turn produces a May employment change that runs counter to the underlying fundamentals. Over the last 25 years, the consensus has over-estimated May nonfarm payrolls 16 times (64%) with an average forecast miss of 99k.”
In addition to the bad long-term history, the short-term history seems to be pointing to a disappointing report in his opinion.
“Recent history has been right in line with the longer term pattern, as the consensus over-predicted May nonfarm payrolls in each of the last three Mays by an average of 98k,” he said. “Given the spate of generally soft economic data over the past month—retail sales, industrial production, housing starts and ADP—combined with the tightening of the budget sequestration—there are also fundamental reasons why May payrolls could disappoint yet again.”
Having said that, LaVorgna thinks we shouldn’t freak out about a bad report for three reasons:
- Jobs reports usually get revised up.
- Initial jobless claims have been moving lower.
- The housing sector is in “recovery mode” which should fuel job growth.
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