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Jobs Report Preview: Temp Employment Indicator

7/2/2012

 
Kevin Spires, CFA, FRM

With the monthly jobs report due out on Friday morning, I am reviewing my favorite employment indicators this week to get a sense of the underlying trend in employment.  As I have written before, I don't think the Jobs Report itself is a very good data point, statistically speaking.  For instance, the bls states that the confidence interval of the monthly change in jobs is +/- 100,000 jobs.  Last month, 69k jobs were reportedly added in May, well below the 150k that the market was expecting about a week before the report - making the miss not statistically significant.  Yet the S&P 500 dropped by over 2% after the release then rallied 6% from that day until the end of the month.  Go figure.

Growth Rate of Temporary Workers predicts 200k+ jobs/month.
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The temporary workers head count in the jobs report is a good predictor of total job growth in the following 2-4 months.  With strong growth earlier this year in temporary workers, one would expect 200k+ total new jobs per month.  This Temp Workers indicator is especially good at predicting turning points, but has a lower correlation during expansions.  No major contraction in employment is being predicted at this point, so if I could only look at this one indicator, I would say steady job growth will prevail.


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