The US jobs report will be released at 8:30 AM ET tomorrow.

Last month (April), the payrolls came in at 175K which was much lower than the 243K estimate at the time. The prior month revision was -22k.

Other details from April's report showed:

  • Unemployment rate 3.9% vs 3.8% expected (3.8% prior)
  • Participation rate 62.7% vs 62.7% prior
  • U6 underemployment rate 7.4% vs 7.3% prior
  • Average hourly earnings +0.2% m/m vs +0.3% expected(+0.202% unrounded)
  • Prior avg hourly earnings +0.3% m/m
  • Average hourly earnings +3.9% y/y vs +4.0% expected

What is expected for May?

  • Non-farm payroll estimate 185K (vs 175 theK)
  • Private payroll, 170K vs 167K last month.
  • Manufacturing payrolls, 5K vs 8K last month
  • Unemployment rate 3.9% est vs 3.9% last month
  • Average earnings MoM 0.3% versus 0.2% last month
  • Average earnings YoY 3.9% versus 3.9% last month
  • Average workweek (hrs) 34.3 versus 3.4% last month
  • labor force participation rate:No estimate versus 62.7% last month
  • U6 underemployment: No estimate versus 7.4% last month.

Looking at some of the employment data released so far:

  • ADP employment change 152K vs 173K estimate. Prior month was revised to 188K vs 192K. LOWER
  • ISM Manufacturing PMI 51.1 vs 48.6 last month. HIGHER and above 50.0 (expanding)
  • ISM Non- Manufacturing employment 47.2 vs 45.9 in April. HIGHER but below 50.0 (contracting)
  • JOLTs job openings: 8.06M vs 8.37M estimate. LOWER and lowest level since February 2024.
  • Challenger layoffs 63.816K vs 64.789K last month. Little changed, but lower than the 2024 high at 90.39K
  • 4 week MA of initial jobless claims 222.25K. Highest levels since September 2023. The highest since the fall post Pandemic reached 253K. The low was at 197K.
US jobs

The Fed officials have been cautious largely due to the strength in the jobs. However, last month was a shot across the slowdown bow. The NFP was at the lowest level since October 2023 and near the lows of the recent range. However, 1 month does not a trend make. Putting two slower gains like 175K estimate is likely to be good enough for the Fed to stay on hold but be confident that the soft landing is still progressing. It also strings 2 slowing numbers which should help to keep inflation in check.

If the number is <125K that may give markets some concern that the landing is a little more bumpy. The good new is it would nudge the Fed toward easing sooner and will have traders thinking 2-3 cuts may still be in the cards with 1/2 the year left (if inflation can move lower as well of course). The bad news is traders - especially in stocks - may be spooked by the potential for lower growth at least in the short term and for the more vulnerable sectors of the economy.

A stronger number (>225K) would likely lead to a rotation back higher in yields. This week the yields have move down -35 or so basis points. A retracement of the declines would be in order and that is likely to hurt stocks at least temporarily especially given record levels.

Something in the 125K to 225K might be the sweet spot that keeps the Fed hold but gives traders confidence that the economy is still moving forward at a steady pace.