24/7 Wall St.

Despite the Federal Reserve keeping its target fed funds rate on hold at a target range of 0.75% to 1.00%, all eyes are waiting for Friday’s key employment report from the Labor Department. Janet Yellen and the Federal Reserve did offer a signal of employment trends and their message is that a gradual rise in fed funds remains appropriate. No changes were made regarding the statements around the future of the Fed’s $4+ trillion balance sheet, while maintaining that Fed Funds will remain below historical norms.

24/7 Wall St. wanted to focus just on the employment aspects of the Fed’s statement and wanted to show that here have been some lower growth trends just in the last few days around employment.

The FOMC did issue a statement and data pertaining to jobs and employment have been highlighted below:

• Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen even as growth in economic activity slowed.
• Job gains were solid, on average, in recent months, and the unemployment rate declined.
• …economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further…
• The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

Elsewhere this week, other key employment data were shown below.

ADP’s private sector payrolls report showed a gain of 177,000 jobs in April. This was right in-line with the Bloomberg consensus estimate of 170,000 when you consider its Econoday range was 125,000 to 230,000.

ADP’s prior report covering March was revised lower to 255,000. As a reminder, the preliminary report of 263,000 had been much more positive than the actual BLS report that was released two days later.

The Institute for Supply Management (ISM) gave two different views on the strength for employment trends this week. Monday’s report showed the manufacturing sector and Wednesday’s report showed the non-manufacturing sector’s employment trends:

• While the manufacturing sector rose for the 95th consecutive month in April the employment component here posted a big drop despite still being a positive reading. The Employment Index in manufacturing registered 52%, a decrease of 6.9 percentage points from the March reading of 58.9%.
• The Employment Index for the non-manufacturing sector decreased 0.2 percentage point in April to 51.4 percent from the March reading of 51.6 percent.

These are the views ahead for Friday’s key Labor Department report versus past reports:

• For the unemployment rate itself, March’s preliminary 4.5% is expected by Bloomberg to become 4.6% for April. This formal unemployment rate change can be affected by myriad issues, largely by the labor force participation rate — that workforce participation rate in March was 63.0%.
• Payrolls are actually given far more weighting by the financial markets, even if the newspapers and media often focus on the headline unemployment rate. Nonfarm payrolls were up a rather disappointing 98,000 in March, and Bloomberg is looking for 185,000 nonfarm payrolls to have been added in April. Reuters has a consensus estimate of 190,000 for April.
• If you back out the government jobs, there are the private sector payrolls. This was just a preliminary gain of 89,000 in March, and Bloomberg has a consensus estimate of 180,000. Reuters has a consensus estimate of 186,000 for April.