Here's what to expect from Friday's big jobs report
Why is May's nonfarm payrolls report considered crucial for the Federal Reserve's decisions on interest rates?
May's nonfarm payrolls report is considered crucial for the Federal Reserve's decisions on interest rates because it provides valuable insights into the current state of the U.S. economy and its trajectory. The report includes information on job losses and gains, as well as the overall health of the U.S. labor market, which can significantly influence monetary policy decisions and market movements1.
Economists expect the Bureau of Labor Statistics to report that the U.S. economy added 190,000 more jobs in May, up slightly on the month. Additionally, average hourly earnings are expected to show a 0.3% increase, slightly higher on the month, putting the 12-month increase at 3.9%. This data is important because it helps determine whether the Federal Reserve can ease up in its battle against inflation2. A weaker reading would indicate a slowdown in the economy, potentially leading to rate cuts, while a stronger reading would suggest that there is no urgency to cut rates.
Other employment indicators, such as private payrolls growth and initial filings for unemployment benefits, have shown a deceleration in the labor market. This makes the May nonfarm payrolls report even more consequential in determining the direction of the U.S. economy and the Federal Reserve's policy decisions.
How does the job addition forecast for May compare with the actual job growth in April?
The forecast for job growth in May is expected to be slightly higher than the actual job growth in April. Economists surveyed by Dow Jones predict that the U.S. economy added 190,000 jobs in May, up slightly from the 175,000 jobs that were added in April.
What were the findings of ADP regarding private payroll growth, and how does this relate to the overall employment trend?
The ADP National Employment Report found that private sector employment increased by 152,000 jobs in May, with annual pay up 5.0% year-over-year. This indicates a slowdown in private payroll growth, which is consistent with other employment indicators showing a deceleration in the labor market. The overall employment trend is being closely watched for signs of weakness, as it could influence the Federal Reserve's decision on whether to ease up in its battle against inflation. A weaker jobs report could prompt the Fed to cut interest rates sooner than expected, while a stronger report would reinforce the idea that there is no urgency to cut rates.