GOLDMAN: 3 reasons why the jobs report could be great and 3 reasons why it could stink

On Friday, we’ll get the numbers on how the job market performed in April.

According to Bloomberg, the consensus among economists is for the report to show a gain of 230,000 jobs in April from 126,000 in March. They expect the unemployment rate to have ticked down to 5.4% from 5.5% last month.

Goldman’s forecasts are right in line with the consensus.

In a note previewing the report Thursday, Goldman’s David Mericle wrote: “While labour market indicators were mixed in April, the employment components of service sector surveys were strong and better weather conditions should provide a boost. In addition, we see some upside risk to our forecast from a calendar effect.”

Here’s three reasons why Mericle says the report may beat expectations:

  1. Service sector data was strong in April. The numbers from Market services, the Richmond Fed, the Dallas Fed, and ISM all showed gains from the previous period.
  2. The four-week moving average of initial jobless claims fell in the weeks leading into the reference period of survey for the jobs report.
  3. It’s warmer. The weeks leading into the survey period for April were warmer than usual, while the weeks leading into the same period for March were colder than usual.

And here’s why the report could be another disappointment:

  1. The employment components of major manufacturing surveys declined. They fell in the ISM, Empire State, Kansas City Fed, and Markit manufacturing surveys.
  2. Job availability shrunk. The Conference Board measures this through the difference between the share of households reporting that jobs are easy to get, versus those saying the opposite.
  3. The job cuts announced by Challenger, Grey and Christmas on Thursday rose to a three-year high in April, led by cuts in the energy sector.

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