Daily Spotlight: Previewing Friday’s Jobs Report

Summary

On Friday, the Bureau of Labor Statistics (BLS) likely will provide more evidence that the U.S. job market is healthy but cooling. The Street should be happy if the May unemployment rate stays close to April’s 3.9% and payrolls remain slightly below 200,000. Signs of increasing recession risk or reaccelerating wage pressure would roil the markets — but we don’t see evidence of that in the wide range of employment indicators we follow. Jobless claims are the first place we’d look for signs of a serious slowdown. Recent readings look healthy. The four-week average, which smooths the week-to-week volatility, has risen from about 200,000 at the beginning of the year to 222,500. But that is still well below the critical 300,000 that would raise recession flags. Layoffs and discharges from the Job Openings and Labor Turnover Survey (JOLTS) likewise remained low. Many companies have seen how hard it can be to find qualified staff. That said, there also isn’t evidence of surging demand for labor. Average weekly hours is an important leading indicator. If companies see an uptick in demand, it is logical they will boost the hours of existing employees before they contract new ones. Likewise, they may turn to temporary help services. Both of those indicators from the BLS are trending lower. On a more anecdotal level, the Federal Reserve’s Beige Book, which is a survey of economic conditions that is released before Federal Open Mar

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