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Prepare for Another Jobs Report Disappointment: RBS’s Girard

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As if we needed more reason to be pessimistic about the May jobs report, a quartet of weak economic data --(ADP Private Payrolls, Initial Unemployment Claims, Q1 GDP and Chicago PMI-- has all but clinched that another month of hiring disappointment is headed our way.

Officially, consensus for the May report (which comes out at 8:30 a.m. ET, Friday) is for 150,000 jobs added after troughing in April at 115,000, and posting average monthly gains of about 250,000 for the first three months of the year.

"If we actually hit the consensus numbers it will be an upside surprise," says RBS Senior Economist Michelle Girard, in the attached video. "So risk is to the downside."

Even so, Girard says today's jobless claims disappointment comes too late to have an impact on May's hiring, which is why she is not tweaking her estimate of 175,000, pointing out that a revision by 10 or 20 thousand jobs, within a labor force of 130 million, is statistically irrelevant.

Instead she is focusing on clarifying some common misconceptions, such as the 8.1% unemployment rate. While many have said the decline is the result of people dropping out of the labor market and giving up on their job hunts, Girard says that's not what's happening.

"We've actually, over the last year, had more people find jobs," she says, highlighting a gain of over two million people. "Baby boomers are aging, and more people are retiring," she explains. She says the decline in the so-called labor participation rate is going to continue, ''even when the economy gets a whole lot better."

As for GDP, today's revision to 1.9% in the first quarter was not a real surprise or disappointment, and she continues to forecast growth of about 2.5% if you're looking through the "wiggles" in quarterly data.

"2.5% GDP is certainly not enough to make everybody feel good," she says. "But I don't think it suggests we're as vulnerable as people may fear, either."

To be sure, even though a weak jobs number is expected tomorrow, a terrible result—along the lines of what we saw in April—could actually bode well for stocks and hammer bonds on the presumption that it will entice the Federal Reserve to act sooner.

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