US Jobs Report Revised Upward
With holiday hiring kicking into gear and most census workers already off the rolls, job growth in Friday's report could outpace expectations, say Morningstar's Bob Johnson and Vishnu Lekraj.
Morningstar.com US Jobs Report Revised Upward Jason Stipp: I’m Jason Stipp for Mornigstar. Now that the midterm elections are mostly in the rear view mirror and the Fed had spoken we’re turning our attention to the Friday employment report here with me to offer their take on the perspective numbers are Morningstar’s Bob Johnson Director of Economic Analysis and Vishnu Lekraj who covers the employment sector for Morningstar. Thanks for joining me guys. Vishnu Lekraj: Thanks for having us. Bob Johnson: Nice to be here. Jason: So the first question for you Bob, we got the ADP numbers on Wednesday. They showed for October 43,000 private sector jobs added. They also revised upward the loss that they had seen in a month before, from 39 to 2,000 jobs lost in the prior month. This seems like the continuation of a relatively mostly positive trend if a sluggish trend what are your take on the ADP numbers. Bob: Yeah, I think ADP has tended for the last 5 or 6 months to underestimate rather consistently the amount of jobs that are growing in the private sector and I think this may be just another one of those and we’re really surprised to see how big a jumping revision there was in last month’s number and this will be one of the first really positive numbers we’ve seen a little while out of the ADP survey and to put in respect I think the average for the year is around 34,000 jobs grown and kind of arranged with minus number to as high as 65,000 so it’s a relatively positive number from a group that’s been very negative. Jason: So Vishnu when they were reporting it, they saw some difference between the services and the manufacturing side, but your take on how they’re looking at those numbers and how we saw that division between the services sector adding mobs and what they reported as continued losses with manufacturing side? Vishnu: Right if continued to report manufacturing loses due at the whole year, I think Bob made a good point previously when we were talking about this before the video being shot that they’ve always said the manufacturing was you know letting people go but to be alas was reporting positive numbers for a while there. When you take a look at the numbers and you break them apart. The service sector really drove the growth this time around and particularly these small and mini-size businesses drove growth which is a very good sign because those type of businesses tend to lead us out of recovery and we need those business to hire more in order for us to sustain some growth and employment market. Jason: Although this looked like good signs on the ADP report Bob did say that given them honest PDP growth that we had seen in the second and the third quarters and the lag that employment tends to follow with GDP growth they’re saying that they’re not going to be surprised if we had several more months of pretty sluggish job growth. Even if the economy picks up a little bit because there is some lag there are you expecting several more months of really, really sluggish growth here? Bob: I think we’re going to see a continuing positive pattern in the job growth and I’m not expecting anything terribly robust. I don’t think we’re going to get up to the 300,000 jobs that we really probably need to get everybody back to work every month. I think we’ll see some slow steady improvement. I think there’s a few things of a vision we talk a little bit out in the retail side that we’re coming into a period of the year when that tends to be a little bit out of there to the numbers and then people have said some positive things that they maybe more than usual this holiday season so I think that certainly helpful thing in the months that had. I think that we’ll see some better growth in the months ahead as people can’t work. The people they have anymore the ones that keep coming back to instead of hiring people they have been extending the hours that those people were. In fact I kind of went back and look at the numbers and if people had worked the same number of hours per week. We would have grown employment in other words they would have to go out and hire more people instead of working what they had harder. They would have a hired a million and a half more people and that’s a pretty good number over a year that that would have added so I’m optimistic the job growth is going to get better going for it I think there maybe just a little bit too negative. Jason: So Vishnu you also cover the staffing companies and they’ve reported a lot recently what have they had to say? Vishnu: Very, very good results. They have been reporting 20% plus revenue growth. More than expansion, they expected to stay the same and move two to fourth quarter into 2011 and they don’t see me slow down so when you combine that with what’s going on what you call the market I do expect a steady stream of growth a building block upon a building block and it should gain momentum right at the 2011. Jason: Sure what are the things that you’re looking at Vishnu staffing companies, you’re obviously looking at some other things you can be on ADP what are those indicators and what are they telling you? Bob: The big one I would like to use is the employment portion of the ISM purchasing manager’s report. Historically I focused on the manufacturing side and the numbers there are very good and improved in the latest month that we got data Monday and then just more recently this week we got the data on the non manufacturing side and those numbers also showed improvement on the employment side of the ledger and so those numbers the ISM employment numbers have been darn good indicators of what’s happening going forward and both of those were up nicely in the last month so I’m optimistic on those so those are that’s why I feel the way that I do and then other things that I will be watching here I’ll be watching the hourly wage to see if we can be getting at some improvement there. As we talked about the hours work it will be another thing that I will be looking at and we’ll be looking at the mix a little bit you know. We get the retail surge that Vishnu is kind of really hoping for you. Jason: It sounds like potentially some bright spot since so let’s get down to business for Friday’s report. Vishnu what do you expecting to see as far as the job gains and what’s your overall take on the report, could there be any surprises there and what will you be looking for? Vishnu: I think there’s a strong possibility getting upsides surprised this month. The reason I say that is because there’s a holiday hiring kicking into gear and census workers are all done and I could send a lot of cash in the balance sheets and retailers have been really trying to push hard to gain ground over this holiday season. Bob can talk more about that but consumers spending is something they’re trying to stimulate and when you combine all of that I think we’re going to get between 50 and 70,000 jobs this month probably hold the study up maybe 10 basis points but overall I think there’s going to be a good positive report and there could be offset surprise. Jason: Bob are we expecting upside surprise. Bob: I am as well and I’m thinking you know with the initial claims looking better the ISM data looking better and kind of the consensus seems to be for 50,000 job growth on the private sector and that just seems to low given kind of the good news and some background I don’t even know if it’s getting a lot better I mean that will be in the 50 to 100,000 range and obviously the wild card is how many jobs were lost through mergers and acquisition s which has been a big impediment in some of the job gross statistics. Jason: But one thing we know won’t be affecting the numbers on Friday to census as most of those were of course had been let go in the prior month so we’ll look forward to checking with you guys and see what the actual numbers are and to get your take on Friday. Thanks so much for joining me. Vishnu: Thank you. Bob: Thank you.