Census Plays a Wild Card

Total nonfarm payrolls are expected to increase by 270,000 in May. The wild card is the number of hires by the Census Bureau, which typically spike in April or May prior to the official census year. We are betting on 90,000 additional hires. The government shutdown delayed some recruiting, which was slated to start in January. By early March, the government had only hired 800 workers to fill thousands of positions to start the process of checking maps and addresses. The goal is to have more than 100 temporary offices up and running by August. Census workers are required to be: 18 years old, a U.S. citizen holding a valid driver's license and access to a car, unless living in a major city where mass transit is available. Applicants must also have an active email address, access to a computer for online training and be able to pass a criminal background check. They need to work flexible hours, including nights and weekends. This is all a tall order in an economy in which workers are becoming scarce. The job gains will show up in federal government employment, flagged as census jobs by the Bureau of Labor Statistics (BLS).

Private payrolls are expected to come in at 180,000 in May, which is still a bit weaker than we saw in April. Hiring in healthcare and professional services is expected to drive overall gains. Hiring in leisure and hospitality should be strong, albeit constrained by labor shortages. Managers in tourist areas have been complaining about a lack of foreign workers for the summer, especially in areas with the most rapidly aging workforces. Part of Maine’s tourism business was hobbled by a lack of summer workers last year.

Weak spots in this jobs report are expected to be in manufacturing, construction and retail. Manufacturing jobs have been hit by the global slowdown, tariffs and an overhang of inventories. Vehicle manufacturing remains particularly weak as sales have slackened. We are likely to see some layoffs related to the idling of the 737 MAX by Boeing. The initial slowdown in production was thought to be temporary, but customers have extended order cancellations and, in some cases, are refusing to take delivery of planes, which will start to take a toll on suppliers as well as production at Boeing’s plants.

Construction activity and jobs have been victims of the weather. An unusually wet Spring delayed projects, most notably in the single-family housing market. Some of those losses will be recouped in the months to come. Commercial construction remains strong but is showing signs of a bubble. Property values are now outpacing rents in what were some of the hottest markets.

Announcements of retail closures surged in the first quarter, as traditional brick-and-mortar retailers struggle to compete with online, notably Amazon. Investment in online operations has picked up, but not enough to offset the drag from empty malls.

Average hourly earnings are expected to rise 0.3%. Year-over-year gains are expected to hold at a 3.2% pace. There is some downside risk that we fall short on wages in response to weakness in manufacturing. That would raise concerns at the Federal Reserve. The threshold for a preemptive cut in short-term rates is high, but that could change rapidly.

In the separate household survey, we expect to see the unemployment rate rise a tick to 3.7% as more workers are pulled from the sidelines. Census hiring should help reengage some of the workers who have been left behind.

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