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By Jason Stipp and Robert Johnson, CFA | 06-05-2013 12:00 PM

Stars Aligning for a Lackluster May Job Report

A better-than-expected April report and two consecutive months of mediocre ADP payroll data could make for an underwhelming government employment report on Friday.

Jason Stipp: I'm Jason Stipp for Morningstar.

Ahead of the government employment report for May [on Friday], we got ADP private-sector employment data for the same month [on Wednesday]. It showed only 135,000 private-sector jobs were added to the economy [last month]. That was less than a lot of economists were expecting.

Here to offer his take and also a preview of Friday's report is Bob Johnson, our director of economic analysis.

Thanks for being here, Bob.

Bob Johnson: Great to be here.

Stipp: 135,000 was less than a lot of economists expected. Did it look light to you?

Johnson: Yes, the number looked light to me, and frankly the ADP number was light the previous month, too. They were far below the government number. In fact, [last month] we saw the ADP number, which was originally reported as about 119,000 jobs added in April, and everybody [thought it meant that] we were going to have a bad Friday when the [April] government number came out. Lo and behold, the government number was pretty good at 175,000 private-sector jobs [in April].

ADP's track record is not perfect, but now it's been sloppy for two months in a row, and I'm wondering if some of that might creep into the government number on Friday.

Stipp: Could be that it shows us there are some headwinds going into Friday.

When you look underneath the top line on the ADP report, you said there's not a lot that really stands out. There's not a lot that looks really strong and not a lot that looks exceptionally weak, either. Just kind of mediocre.

Johnson: Yes, that's exactly right. I kind of had a blah feeling going into this whole report, because there's just not a lot happening.

We've talked many times about construction: The residential side is doing well, but the business construction is now beginning to offset some of that, and it's kind of in the doldrums right now. Even on the residential side, frankly, they are having a hard time finding workers. I'm hearing stories from the field now that there are homes sitting unfinished because there aren't people to put siding on some of those homes. So it's an interesting phenomenon.

But construction did add about 6,000 jobs on this report, so it wasn't nothing. But unfortunately the manufacturing side took off about the same number, as exports to Europe slow, and a lot of the big manufacturers ship a lot, and it does impact that category. So manufacturing--heretofore a rather strong part of the recovery--is actually now starting to be a little bit of a drag.

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