Employing a Little Foresight

A look at what you can reasonably expect from the April employment report coming Friday.
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Preparation ... H

JACKSON HOLE, Wyo. -- During the past 48 hours, your narrator has received hundreds of emails urging him to please calm down (and he is trying to act on this good counsel). But almost as many have written in to ask that he weigh in on what they can reasonably expect of the April

employment report when it hits Friday.

And he is happy to serve up an opinion.

But do keep in mind that opinions are like ... oops! can't write that ... posterior orifices.

Everybody's got one.

Look for a big headline jobs print.

For three reasons. One is the rebound thing.

Monthly payroll gains were trending at 233K (on a 12-month moving average basis) as of February. Then March delivered a paltry 46K increase. So payrolls printed 187K below trend last month.

Consider that a 150K below-trend payroll print in July 1998 led to a 322K-job increase in August. Consider also that a 199K below-trend payroll print in March 1998 led to a 320K-job increase in April. Consider also that a 173K below-trend payroll print in August 1997 led to a 386K-job increase in September. Consider finally that a 233K below-trend payroll print in January 1996 led to a 479K-job increase in February.

The second is that the job-increase estimates from three of the most capable forecasting units around clock in at an average 310K.

The third is something that the honorable forecasters at

Salomon Smith Barney

dug up. Specifically, recent

Manpower

numbers (Manpower is a staffing-services firm that surveys the hiring intentions of more than 15,000 public and private employers every quarter) suggest that the underlying pace of monthly job creation currently stands at roughly 250K. So, in the wake of an aberrantly weak March increase, the April job increase would actually have to print way up at 407K in order to get trend employment back up to that level.

As neat as those three tidbits are, none of them, of course, guarantees anything.

But here's the deal.

There will not be a material deceleration in economic growth in the absence of a material deceleration in consumption growth, and there will not be a material deceleration in consumption growth in the absence of a material deceleration in job growth. And your narrator is willing to bet his entire CD collection that the April employment report will do nothing to support the notion that a material deceleration in job growth is afoot.

People like

The Tool

and

Tool Juniors

will, as they have been

doing for ages, surely argue the converse, and you're free to believe them if you like.

Look for hourly earnings to rise 0.4%.

Earnings rose a below-trend 0.2% in both February and March. It's catch-up time. Plus, two of the last three Aprils have delivered increases well above trend (one 0.5% and one 0.6%). An upside earnings surprise shouldn't shock anyone.

Not that it matters much. This employment-report measure of wages was growing at a 4.2% year-on-year rate a year ago, and the April increase, whatever it turns out to be, will produce a year-on-year rate much lower than that.

But you either believe that wage growth is decelerating, in which case you believe the wages and salaries

component of the

employment cost index

speaks the truth, or you believe that wage growth is accelerating, in which case you believe

one or

another of two alternative measures of hourly compensation speaks the truth.

The employment-report measure of wages is not at all unlike the last kid selected for the pickup game.

Look for the unemployment rate to either drop a bit, rise a bit or remain the same.

Who cares? It's right near its lowest level since

Houses of the Holy

was released, and it'll be even lower in six months.

And that's all there is to that.

As far as a trade goes? Your correspondent is zero for a billion on employment-report trades. For years now, the same diligent

BLS

researchers wait patiently for me to make a call and then tinker with the numbers Thursday night to guarantee they'll sink me. (Paranoid? You bet. But only because they're out to get me.) Count me out on this one.

If you held a gun to my head? Being long going in seems dangerous. The market buckled under a stale sign of strength (the GDP report); won't it do the same under a fresh one?

So it seems better to be short going in.

But keep my record in mind.

And remember what they say about opinions.

Side Dish

Best make-out aid?

A lava lamp.

Being alone.

A Barry White CD.

Marshmallows.

All of the above.