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Macro Precast
US/Private nonfarm payrolls
Date/Time of Macro Precast: 5/31/2016 02:53 PM NY time.

Date

Time

Last

Private nonfarm payrolls

Mo-Mo Chg
3-Jun
08:30
171
Standard deviations (of change in monthly NFP growth, last 2 years)
Date and time are NY time.

Market
median

DeepMacro
precast

150

196
0.33

We expect private nonfarm payrolls to exceed the market expectation by a comfortable margin. Perhaps
more importantly, we expect payrolls to accelerate from Aprils disappointing result of 171K. Our Macro
Precast of 196K is adjusted for the Verizon strike; adding back those workers gives a forecast of about
232K. 196K (or an increase of 25K from April) would be about 0.33 standard deviations of the monthly
changes in private payroll growth in the last two years, but adding back the 36K strikers makes this a
heftier 0.78 standard deviation move. Implicitly, we think some of the short-term factors that were
blowing very cold in the early winter (China growth and currency fears, the collapse of oil) have had
their peak impact on employment, and the labor market is returning to its earlier trend.

Turnaround from late April

Our precast is based on internet job postings by about 30,000 companies.1 In May, this total rose
smartly, more than offsetting its decline in April. In fact, aggregate hires according to this metric
(seasonally adjusted) are at the highest level of the year. The data are high frequency (daily), which
shows developments within the month and possibly points to turning points.

LinkUp and SmartMarketData LLC.

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1,000
900
800
700
600
500
400
300
200
100
0

490
470
450
430
410
390

1 Jan 2016 = 100

1 Jan 2016 = 100

Figure 1. Hires, Daily and 7 Day Average, 1 Mar 2016 26 May 2016 (1 Mar 2016 = 100)

370
350

Daily

7 Day Average

Note: Vertical lines denote Saturday of the week of the NFP survey date.
Sources: DeepMacro, LLC., LinkUp/SmartMarketData.
We are implicitly forecasting that there was a mini-turning point in May: from surprising weakness in
April, back to high jobs growth. Hires troughed in early April, and picked up more convincingly from late
April into May (see Figure 1). April was when the maximum effect of winter weakness (from the Chinese
economy, RMB instability, and oil price collapse) was felt. Oil and the RMB both began to trough in the
first part of February. It took a while for these stabilizations to take root, but after three or four months
had passed, businesses returned to hiring plans consistent with their view of the business cycle. It is
hard to put business on hold indefinitely because of risks.
Furthermore, breadth was good in May. Hiring rose in a majority of the main sectors in private nonfarm
payrolls; most occupational categories (107 out of 130 job classifications); and all but three states (see
Figures 2 and 3). The breadth of hiring is another reason why we think that a decent upside surprise to
the consensus is coming.

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120

120

100

100

80

80

60

60

40
20
0

Mo-Mo Pct Chg

Mo-Mo Pct Chg

Figure 2. Hires by Occupational Category, April vs. May 2016 (Mo-Mo Pct Chg)

40
20
0

-20

-20

-40

-40

-60

-60

Note: Each bar represents the month on month change of hires in an occupational sector.
Sources: DeepMacro, LLC., LinkUp/SmartMarketData.

Figure 3. Hires by State, April vs. May 2016 (Darker Green = Higher Mo-Mo Chg)

Sources: DeepMacro, LLC., LinkUp/SmartMarketData.

The Verizon strike and our precast

We took off 36,000 jobs from our precast to reflect the Verizon strike. About 36,000 Verizon workers
were on strike and not on the payroll for the full pay period of the May NFP report, so they will come
out of the tally. Did Verizon hire workers to replace the strikers, even temporarily (which would count as
jobs created in the NFP report)? Through the internet, no: Verizon hiring activity in May was nearly
indistinguishable from normal patterns. In the last Verizon strike in August 2011, the month on month
change in wired telecoms workers was almost exactly equal to the reported number of Verizon workers
on strike. We expect much the same effect this time.
These workers are returning to work on Jun 2, so they will be on the payrolls for the June NFP report,
and markets will quickly add back their estimated strikers to the number that hits the tape on Friday.
3