After back-to-back data disasters in April and May, the June Non-Farm Payroll report out tomorrow could bring investors some much needed relief. While economists, on average, are expecting a modest rebound to 100,000 new jobs created last month from 68,000 in May, some industry veterans think the final report of an otherwise awful second quarter will be a whole lot better than that, especially considering today's better-than-expected ADP Private Payroll report.
"There's a pretty good correlation, not real tight, but a reasonable correlation between the ADP numbers and the Non-Farm Payroll numbers," says Hugh Johnson, the CIO of Hugh Johnson Advisors. "What it really tells us is that the consensus expectation for 100,000 or so being added in June is probably too low. We're probably going to see a number that's closer to 150,000 to 160,000," he adds.
If he's right, it would (at least temporarily), stem fears that the past two months of drought-like hiring have found a bottom, albeit still well below Q1's racy pace of about 200,000 a m0nth.
"We've had some weak numbers and everybody has been worried about recession. I think this number will put th0se fears to rest," Johnson says from his office in Albany, New York.
Not to be a buzz-kill, but I felt the ADP report did contain at least one troubling indicator; the fact that large companies with more than 500 employees added just 11,000 jobs in June or 6% of the headline figure, with small and medium businesses hiring the rest. Johnson doesn't disagree and thinks that tomorrow's report will tell the same tale.
As for the weekly jobless claims trend, despite the best number in a month today Johnson says that's mostly just noise. Of today's report that 374,000 Americans filed first time unemployment claims last week Johnson says, "this is a swing to the downside and that's likely to be offset by a number that'll come back up when we see the numbers next week." He adds that the less noisy four-week moving average is a more accurate measure of the state of joblessness and that number shows anemic growth just like the monthly Non-Farm Payroll data has of late.
We'll find out more tomorrow at 8:30am when the Bureau of Labor Statistics releases the data.