What to Expect from Friday’s U.S. Employment Data?

Markets await the release of a bundle of jobs and employment reports in the United States, which are set to show more indicators about the progress of economic recovery from the coronavirus pandemic.

May’s employment data will come following April’s disappointing nonfarm payrolls reading.

A recent reading of the ISM manufacturing sector’s PMI pointed to expansion that was better than expected in factory activity. In addition, as more businesses reopen and ease the lockdown restriction and preventive measures, more job opportunities are being created or returning to the market.

Meanwhile, recent media reports suggested that despite the economy reopening, some businesses are still not able to hire enough people to operate at full capacity.

Accordingly, many states across the U.S. are ending the pandemic unemployment benefits programs, including the additional $300 weekly checks.

As much as 25 states, nearly half of the country, have already deciding on cancelling the                additional payments by the federal government to the unemployed, which might affect as much as 2.8 million people.

The U.S. labor market might be showing some positive signs as the economy recovers from the coronavirus pandemic, but it remains to be challenged by some problems some of which might be unnoticed.

A paper by the Federal Reserve Bank of San Francisco showed on Tuesday that the conflicting signals are unprecedented, indicating that the negative indicators should be looked at more than those suggesting recovery.

The most recent data suggested that applications for new claims of unemployment benefits in the U.S. declined below 500,000, with initial claims for state unemployment benefits decreasing by 34,000 to a seasonally adjusted 444,000 for the week ended May 15, according to the U.S. Department of Labor.

Meanwhile, there were 406,000 initial claims for unemployment benefits in the week ended May 22. The reading came in better than the market expectation of 425,000.

This marked the lowest level for the initial jobless claims since the beginning of the global outbreak of the coronavirus pandemic in March 2020.

Nevertheless, jobless claims remain above the 200,000-250,000 average range, which is viewed by economists as a sign of a healthy labor market.

Meanwhile, job openings suggest the job market is tighter, according to the paper that also noted that the labor force participation rate indicates a worse situation than what the unemployment rate reveals.

According to the U.S. Department of Labor, job openings surged to a new record high in March, rising by 597,000, or 8%, to 8.12 million, compared with their level in February, according to the most recent Job Openings and Labor Turnover Survey (JOLTS).

The paper also suggested that negative signals such as the low labor force participation rate provide a better read than do the positive signals.

It is worth noting that the unemployment rate in the U.S. registered 6.1% in April.