Here with me to offer some insights is Morningstar's Bob Johnson. He's associate director of economic analysis. And Vishnu Lekraj, he's covering the employment sector for Morningstar stock analysis. Thanks for joining me, guys.
Stipp: Okay. So if we're going to take that out and really say, okay, if we didn't have the Census this year to get a good sense of where we are in the recovery--if we were going to look at the private sector, the ADP report came out on Thursday, so what was that telling us about how the health of the private employment sector is?
Lekraj: Still growing. It's growing a little bit. The pace of growth slowed over the month, which should lead to a slowing pace of growth for the overall economy in terms of private sector jobs. Not a big deal. We expect the up and down. As long as we can build upon what we did last month, you know, I'll be happy with that.
Stipp: So what did we see last month from the private?
Johnson: We saw 224,000 jobs created in the private sector. ADP and consensus would seem to indicate people would expect that to fall a little bit in May. I disagree with that. I think I've seen some real strength in manufacturing and some other things. I think we may be up from that 224,000 private sector jobs, and that's going to be the key number to watch.
Stipp: Sure. Vishnu, what do you see as driving the private sector? You think it's going to be up/down? Are people a little too pessimistic about it?
Lekraj: I think, they may be. I think, if you look at it, it's going to go up in my opinion, but it's not going to be dramatic. The headline number tomorrow is going to look huge or seem huge, and it's going to give the press and the administration some time to pound the table and hopefully creates some confidence. That's the main positive you can take out of that.
But when you back out the census, you get – you know, as long as the private sector is growing between – I'm looking between 240,000 and 300,000 next month – for May. If they can do that, I'll be happy with that number.
Stipp: So looking ahead to tomorrow's report then, what are you expecting overall including the Census? Where do you think the number is going to come in? Consensus is at 500,000. What are you thinking?
Johnson: Well, I'm thinking the census number of 400,000, and I'm thinking 250,000 on the regular employment, so that gets me to about 650,000. Now the only caveat in there is May and June are both big seasonal adjustment numbers for all college students entering and exiting, and they blow the seasonal factors that could blow me out of the water a little bit, but I'm thinking 650,000.
Stipp: Okay. So they are trying to adjust for that, but they could go a little bit too far one way or the other. What are you expecting to see?
Lekraj: Total number, I'm looking for 630,000 to 570,000 or 570,000 to 630,000. Backing out the Census number of 300,000 to 400,000, looks like private sector should be between 240,000 and 300,000.
Stipp: Okay. So you guys are a little bit more optimistic maybe than consensus. Now the unemployment rate is another one that's going to be released tomorrow as well. Are you expecting that to see tick up a little bit? I know that more folks are optimistic. They might re-enter the job market that can inflate the unemployment rate temporarily. What are you expecting to see?
Johnson: Well, again, it's always a little bit of a guessing game, because this is done by calling people and asking on the telephone. So numbers get a little bit squishy, but it's how people feel when they answer the phone, which is why people like to look at the establishment data a lot of times. The unemployment is calculated by phone calls to individuals.
And I am expecting the rate to tick down a little bit from say 9.9% to 9.8% next month, or this month – the numbers that's reported. And the reason I believe it is we had a huge spike in people entering the job force in the previous month. So I think, we've gotten a lot of this people feeling better and so they now start looking for the job. Some of that's past us, and then we've got the number of Census hires and they don't ask in the unemployment number is that a census job or not, so that won't – that will be in there too. So I would guess the rate is going to come down tomorrow maybe even more, maybe to 9.7%.
Stipp: Okay. What are you thinking for the rate?
Lekraj: Actually, I think, it will be going to tick up a little bit. I think folks are going to continue to go into the job market, look for jobs, take that rate up a little bit. I just want to caution everyone again, this number – all these numbers are going to go up and down. We had the private sector ISM report come out today, and the employment number for that still is below 50, which is saying, we are not – we're pretty much flat. We're not adding jobs in the service sector. So the numbers are going to go up and down. You have to be cautious. You have to understand that it's going to take some while for us to get out of it.
Stipp: And sort of take a step back and look at where the trend has been over time to get a better sense of where we are and sort of not fixate too much on one month's numbers.
Lekraj: Right. As long as that private sector number is above 200,000, that's a very good sign.
Stipp: All right. We'll be looking out for it tomorrow. We'll be touching base with you guys again for your reaction to the jobs report and look forward to having your insights then.
Lekraj: Thank you
Johnson: Thank you.
Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.
