The Independent Market Observer

A Preview of the Jobs Report

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on May 31, 2018 3:18:17 PM

and tagged In the News

Leave a comment

jobs reportMuch of the economic data suggests that the slowdown in the first quarter is passing—this morning’s personal spending report is a good example. But, as always, what matters most for the economy is jobs.

Job growth

This Friday’s jobs report should help confirm that the slowdown has passed and that the economy continues to be strong, with job growth expected to pick up from 164,000 in April to 190,000 in May. Although job growth was softer earlier in the year, the longer-term average has continued to move higher. It is now up to about 200,000 per month, which is above 2017 levels.

If job growth meets expectations, this would be the highest level in the past two months and would push the six-month average growth rate even higher. This increase would suggest that, despite all of the labor supply concerns, there are still enough people available to let companies keep hiring.

Unemployment rate

Moreover, it would show that labor demand continues to be high enough to absorb new entrants into the labor force and continue to drive the unemployment rate down. April’s 3.9 percent unemployment rate was a cycle low, but the continued run of job growth above labor force growth suggests it could decline even more. That said, unemployment is unlikely to decline further in May, as the labor force declined in April and is likely to rebound.

Goods-producing sectors

One major reason job growth is likely to continue is how much of it has come from the goods-producing sectors. Construction, manufacturing, and mining employment is currently expanding at the fastest rate since 1998—a positive signal, as these jobs are signs of economic health. Regional surveys suggest that trend will continue, which should keep job growth in these sectors healthy. After weaker growth in the service sector, industry surveys also suggest that area will continue to gain.

Wage growth

This strength across the board should also push up wage growth, which is expected to tick up from 0.1 percent in April to 0.3 percent in May. Further, the annual rate is expected to rise from 2.6 percent to 2.7 percent. Here again, the growth in goods-producing jobs, which are usually well paying, is a positive factor. Given this, as well as all of the other positive factors, there may be some upside here. Broader measures of wage growth have been trending higher at a faster rate than the wage number itself, so there is certainly room for faster growth.

Bottom line

Overall, the expectations for this report are for continued solid growth, with real room for some upside. If the report does meet expectations, it would suggest that the economy has indeed rebounded from a slow first quarter and that growth continues. It would also provide further grounds for the Fed to raise rates in June.

Subscribe via Email

New call-to-action
Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®