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By Palash R. Ghosh: Subscribe to Palash's RSS feed | June 28, 2010 6:51 PM GMT
After such a disappointing jobs report last month, market participants will undoubtedly be glued to this Friday's non-farm payroll report for June.
The May data featured an increase of 431,000 jobs (the largest non-farm payroll gain since the spring of 2000), but the hiring of temporary Census workers inflated those payrolls.
Paul Ashworth, senior international economist at Capital Economics in London, expects private non-farm payroll employment to increase by 150,000 or so this month.
"Nevertheless, total payroll employment [will probably still fall] by about 100,000, as more than half of the census workers hired in May were [likely] let go in June," he said.
IHS Global Insight expects a larger drop in total unemployment (140,000 jobs lost), pulled down by a drop of about 240,000 temporary Census workers, with the overall jobless rate edging up to 9.8% from 9.7% in May. The jobless ranks will likely be swelled by 20,000 state and local government workers losing their positions, IHS adds.
However, on the bright side, IHS also expects private payrolls to rise by as much as 150,000. In April, private payrolls swelled by 218,000, while May's increase was a meager 41,000.
"April's jump overstated the strength of the labor market, but we think that May's weak increase understated it," IHS noted.
Indeed, that is the key; the private sector.
Paul Dales, the U.S. economist at Capital Economics, thinks the modest 41,000-gain in private sector jobs in May "was just a pause in the improving trend."
Dales cites that average hours worked per week is rising -- from 34.1 in April to a 15-month high of 34.2 in May -- and this bodes well for private sector job growth in the coming months.
"In fact, in the year to May, hours worked rose at the fastest rate since April 1997, " he noted. " A 150,000-gain in private sector employment should reassure the markets and policymakers that the U.S. labor market recovery remains on track."
Nevertheless, joblessness in the U.S., is likely to remain stubbornly high. Federal Reserve chairman Ben Bernanke warned earlier this month that unemployment will probably remain elevated for a "significant amount of time."
U.S. unemployment is actually just a shade below the 10.1% in the euro zone (as of March 2010). In fact, only Spain, Ireland and Slovakia have jobless rates significantly higher than the U.S., while a surprising number of European countries, including Germany and Netherlands, have far lower jobless rates.
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