The stock market should continue to be dominated by developments in the Iran war this week. It should take the May Employment Report in stride, as consensus expects little deviation from recent trends. The wage component could be important for stocks, particularly if it comes in on the soft side.
The Unemployment Claims data support the consensus expectation of a slowdown in May Nonfarm Payrolls. Continuing Claims rose between the April and May Payroll Survey Weeks. Consensus looks for +96k m/m, versus +115k in April. Private Payrolls (Total Ex Government) are seen slowing to +85k from +123k. Continuing Claims correctly predicted speedups/slowdowns in Private Payrolls in 10 of the past 12 months, but it missed in April (see table below).
The Claims data suggest little change in layoffs and hiring in May. Initial Claims averaged 209k per week in May, about the same 208k seen in both April and March. Continuing Claims have moved up slightly since the April Payroll Survey Week.
An historically weak Payroll gain mostly reflects the slowdown in population growth, tied to the drop-off in immigration. An increase in the 50-100k range would be consistent with little change in the Unemployment Rate if there is no change in the Labor Force Participation Rate. Consensus looks for a steady 4.3% Unemployment Rate in May, suggesting near-trend job growth. A speedup in GDP Growth would depend on a longer workweek, increased labor force participation, or faster productivity growth. AI would work through the last channel. Consensus looks for a steady 34.3 Hour Nonfarm Workweek in May.
With the bulk of the May Employment Report expected to be consistent with near-trend growth, the most important component could be Average Hourly Earnings (AHE). A consensus 0.3% m/m or lower print would suggest that the run-up in oil and other commodity prices have not resulted in a wage-price spiral so far. It would support the Fed's preference for a wait-and-see policy approach.
Private Payrolls (m/m change, 000s)
ADP Estimate First-Print BLS Latest-Print BLS Continuing Claims *
April 25 62 167 133 14
May 37 140 69 -74
Jun -33 74 -27 -57
Jul 104 83 77 18
Aug 54 38 -4 2
Sep -32 119 104 28
Oct 42 na 1 -41
Nov -32 69 41 14
Dec 41 37 48 30
Jan 26 22 172 146 94
Feb 63 -86 -148 -14
Mar 62 186 190 6
Apr 109 123 na 40
May na na na -10
* the inverted change in Continuing Claims between Payroll Survey Weeks, 000s
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