Jobs Number Not So Disappointing If You Follow Temp Employment

Everyone is all worked up about the jobs number today and its “being weak”.

‘Shockingly weak’ job growth in May

The job market’s slow improvement got even more sluggish in May, as private sector employers added only 38,000 workers and the number of planned job cuts rose, according to two reports released Wednesday.
Payroll processing company ADP said private-sector payrolls grew by 38,000 in May, after a downwardly revised 177,000 increase in April. The number came in far below economists’ expectations for private sector job growth of 170,000 for the month.

According to prior ADP reports, monthly job gains had exceeded 100,000 in each of the past seven months.
Economists immediately called the 38,000 number “shockingly weak,” “grim,” and even a “hairball.” “The ADP Employment report coughed up a hairball in May,” Robert Dye, senior economist with the PNC Financial Services Group, said in a research note.

Also from the NYT:

The report, released by ADP Employer Services, said the private sector created 38,000 jobs in May, well below the 175,000 jobs that had been expected by economists surveyed by Reuters. It was the lowest number since September 2010.

But if you follow the temp staffing index, you would have seen this chart:

Notice the black circled area. Temp staffing in Jan/Feb was flat to up slightly before starting to rise again in March. Knowing there is a 3-4 month lead time between temp staffing #’s and ADP/BLS numbers, the fact that todays employment numbers were flat to up slightly ought to be not only unsurprising but expected.

In fact, if we look at the previous months (and the 100k plus gains reference in the article above), the improvement in those numbers matches the surge to above the 100 level we saw at the end of 2010. To expect a level of 175k today given what we have seen with the index isn’t very rational.

The key is going forward. Since temp staffing has been rising through March into May we will see that accelerating rise reflected in the July/August jobs numbers. Until then, we should expect improved employment results, but nothing we will want to dance over….. but we shouldn’t be jumping off bridges either…