Here's what to look out for in Friday's jobs report

The Bureau of Labour Statistics on Friday will release its report on America’s employment situation in May.

“I don’t expect many shocks and negative surprises,” Frank Friedman, the chief operating officer at Deloitte, told Business Insider.

“We’ll pretty much see what we’ve had in the last several months” with job gains near the 185,000 mark, he added.

That should be good enough for the Federal Reserve, which meets later this month, to raise borrowing costs for the second time this year as expected.

The economy added 211,000 jobs in April, many more than expected, while the unemployment rate fell to a decade-low of 4.4%.

Via Bloomberg, here’s what Wall Street is expecting for May:

  • Nonfarm payrolls: +180,000
  • Unemployment rate: 4.4%
  • Average hourly earnings month-on-month: +0.2%
  • Average hourly earnings year-on-year: +2.6%
  • Average weekly hours worked: 34.4

Labour shortages

“The fact that we have expectations that are close to 200,000 is pretty amazing,” said JJ Kinahan, the chief market strategist at TD Ameritrade. This is in the context of the economy being near full employment: a theoretical situation in which everyone who can work and is looking for a job can find one. At this rate, and with the unemployment rate back to pre-recession levels, the pace of new job gains is not expected to exceed 200,000 for a sustained period of time.

That’s partly why the report on private hiring from ADP Research Institute on Thursday was startling to some economists. It showed 253,000 new payrolls, many more than forecast.

“Where are these people coming from?” Neil Dutta, the head of US economics at Renaissance Macro, simply asked in an email after the release.

The ADP report did lead economists at Goldman Sachs and UBS to raise their expectations for the official jobs numbers.

The Federal Reserve’s latest Beige Book, containing economic anecdotes from its 12 districts, was peppered with complaints from employers not being able to find enough skilled workers. Boston staffing firms, for example, said vacancies for system administrators, network engineers, and medical assistants were especially hard to fill.

This has been good news for the workers whose wages have increased as a result, although the overall pace has been relatively slow.

Sectors to watch

The leisure and hospitality sector, which includes restaurants and hotels, will be watched more closely as summer approaches.

“If people are starting to eat out more and go on vacation more, we actually do want to see more growth in that area,” Kinahan said. “In a healthy economy, people want to do those things.”

ADP’s private payrolls report showed that leisure and hospitality shed 11,000 jobs in May, the first decline of the year. It had added 41,000 jobs in April. ADP’s overall data sometimes diverges from the official jobs report. Either way, a slowdown in this sector would be “a cause for concern,” Friedman said.

Retail hiring will also be in focus amid mass closures of brick-and-mortar department stores. The outplacement firm Challenger, Grey & Christmas on Thursday reported a 71% year-on-year jump in layoff announcements in May. Ford accounted for nearly 40% of those, but retailers continued to announce the most job cuts this year.

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