Tuesday, May 31, 2011

Friday's Payroll Report Should be "Better than Expected" as McJobs Flood In

This is one week market participants seem to actually care about economic data each month, as key labor, manufacturing (ISM in U.S., PMIs in Europe and China) and service data roll in.

I am unclear why economists have brought the expectation for May hires down so low versus April, when Friday's data should be highly influenced by an influx of McJobs.  The story below gives a hint - seasonal adjustments - but that can't explain it all.  Recall in April, McDonald's Announced an intention to hire 50,000 with a job fair April 19th.  [Apr 4, 2011: McDonald's Set to Hire 50,000 on April 19th]  But since it would be highly doubtful any decisions were made 'on the spot', May's data should be highly influenced by this event.  In fact, McDonald's hired 62,000 (mostly) just above minimum wage workers, so that's an additional 12,000.  With economists lowballing the May data, any figure that does not come close to April's data should be extremely disappointing considering May has a huge head start over a normal month.

Via Marketwatch:

  • For over two decades, the term “McJob” has been used as code word for the kind of low-paying, low-skilled employment that all too often has characterized the opportunities available in an economy with an eroding manufacturing base. But the May payrolls report, due Friday from the Labor Department, really will be influenced by hiring from McDonald’s.
  • On April 19 — about a week after the government conducted its survey for the April jobs report — the hamburger chain ran a promotion designed to hire 50,000 workers. In fact, the fast food giant hired 62,000, most of whom will receive just little above the federal minimum wage.
  • Given that economists polled by MarketWatch were expecting May payrolls to slow to 180,000 from 244,000 in April, there’s a possibility that McJobs will account for a big slice of the jobs created by the U.S. economy during the month.
  • Making it even more confusing is the possibility that seasonal adjustment could sweep away much of the McDonald’s hiring push. “Some of the increase will likely be swallowed up by the seasonal adjustment of this subcategory, since the March-to-June period is typically the peak hiring season as restaurants boost staff levels for the summer months,” said Carl Riccadonna, an economist at Deutsche Bank, in a note to clients.  “Nonetheless, it is our impression the recent hiring day substantially exceeded the usual gains, and as a result should have a measurable impact on overall hiring.”
  • Economists are expecting a slight improvement in the unemployment rate, to 8.9% from 9.0% in April.

  [Feb 3, 2011: CNNMoney - Jobs Coming Back, but the Pay Stinks!]

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