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May Nonfarm Payrolls Preview: Balancing Labor Market Signals Decelerating Hiring Momentum

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Investing with moomoo wrote a column · Jun 6 04:23
May's nonfarm payrolls report will be released at 8:30 ET this Friday. The median forecast of analysts for the May nonfarm employment is 190,000, which, although potentially slightly higher than April, is still expected to be below the first quarter's average level of 269,000. Wells Fargo said the slowdown in hiring in the leisure and hospitality industry and government sectors was an important reason for the previous month's decline in job growth, and this trend is expected to continue in May.
May Nonfarm Payrolls Preview: Balancing Labor Market Signals Decelerating Hiring Momentum
The ISM Non-Manufacturing PMI Employment released on Wednesday also shows that the indicator has been below 50 for four consecutive months, which indicates that recruiting in the service industry, which absorbs the largest labor force, turned weak after February.
May Nonfarm Payrolls Preview: Balancing Labor Market Signals Decelerating Hiring Momentum
■ JOLTs data shows employers are cutting back on job opportunities
The JOLTs report released this Tuesday showed that the demand side of the labor market is further approaching pre-pandemic levels, with the latest 8.059 million job openings being lower than the previous month's 8.355 million and missing the market consensus of 8.34 million. During the month, job openings decreased in health care and social assistance (-204,000) and in state and local government education (-59,000).
The balance of supply and demand in the labor market could lead to a decrease in the number of voluntary resignations, thereby slowing down the active hiring pace witnessed over the past two years.
May Nonfarm Payrolls Preview: Balancing Labor Market Signals Decelerating Hiring Momentum
■ ADP payrolls growth slows to 152,000 in May, much less than expected
According to ADP payrolls data released on Wednesday, private businesses in the United States added 152K workers to their payrolls in May 2024, well below market forecasts of 175K and a downwardly revised 188K in April. The agency noted that the hiring pace slowed in May due to a steep decline in manufacturing. Leisure and hospitality also showed weaker hiring.
"Job gains and pay growth are slowing going into the second half of the year," said Nela Richardson, chief economist of ADP. "The labor market is solid, but we're monitoring notable pockets of weakness tied to both producers and consumers."
May Nonfarm Payrolls Preview: Balancing Labor Market Signals Decelerating Hiring Momentum
■ Initial jobless claims slowly rise
The number of people claiming unemployment benefits in the US rose by 3,000 to 219,000 on the week ending May 25th, marginally above market expectations of 218,000. The initial claim count was firmly above the average from February to April to consolidate the softer momentum in the US labor market. Also, continuing jobless claims rose by 4,000 to 1,791,000 on the week ending May 18th, the most since early April. The four-week moving average for initial claims, which reduces week-to-week volatility, rose by 2,500 to 222,500.
May Nonfarm Payrolls Preview: Balancing Labor Market Signals Decelerating Hiring Momentum
■ The frequency of layoffs has returned to pre-pandemic levels
WARN trackers show that the company with the largest number of layoffs in May was Walmart, which laid off more than 3,000 people, followed by Aramark, ASM Global, and Hello Fresh, reflecting a soft job market in the supply chain sector.
May Nonfarm Payrolls Preview: Balancing Labor Market Signals Decelerating Hiring Momentum
Another indicator of layoffs, the Challenger Job Cut Report, will be released Thursday morning. The indicator has been higher since last year than before 2019. The April report showed that the auto industry, especially Tesla, was expanding layoffs.
Exhibit: United States Challenger Job Cuts
Exhibit: United States Challenger Job Cuts
■ What's the implication for the Fed?
A gradual return to normality in nonfarm employment is expected to provide the Federal Reserve with a suitable rationale for potential rate cuts in the second half of the year.
After the release of JOLTs and ADP data, although the market believes that the Federal Reserve will still maintain interest rates at the FOMC meetings in June and July, there are more bets on interest rate cuts in September. This means that before inflation reaches the Fed's target, investors anticipate that employment data is more likely to be a trigger for the Fed to cut interest rates.
May Nonfarm Payrolls Preview: Balancing Labor Market Signals Decelerating Hiring Momentum
The wage-inflation spiral is also a concept often mentioned by the Fed. The normalization of the job market may cause wage growth to continue to decline, which in turn will reduce expectations for inflation in the service sector. If nonfarm hourly earnings released on Friday slow down, it may further strengthen anticipation for a rate cut.

Related Lesson: Understanding the US Non-Farm Payroll Data
By Moomoo US Team Calvin
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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