US NFP: Likely influenced by unusual seasonal factors - Wells Fargo

According to analysts from Wells Fargo, Friday’s US employment report that showed weaker-than-expect numbers was likely influenced by unusual seasonal factors.

Key Quotes:

“May’s shockingly weak employment report clearly deserves a closer look. While a softer report was expected due to the now-settled Verizon strike, the weaker jobs numbers clearly extend beyond this shock.”

“We believe the most recent deceleration is due to a confluence of factors surrounding this past winter’s unusually mild weather, the shift from traditional brick-and-mortar retailing to e-commerce and the unusually early Easter. These influences boosted employment earlier this year, which meant hiring did not pick up as much as it usually does this spring. The seasonal adjustment process suppresses actual hiring gains each spring, which sees payrolls surge as new college graduates are hired and teenagers take part-time summer jobs.”

“Seasonal influences were most impactful in retail trade, construction and leisure & hospitality. Retailers ‘added’ 160,900 jobs in the first quarter, accounting for more than one quarter of all jobs added in the economy.

“While seasonal quirks account for much of the slowing in job growth, there are some real concerns. Employment in oil & gas exploration continues to contract and manufacturers dependent on exports have seen demand fall sharply, resulting in job losses in the durable goods sector. Sluggish corporate profits have also led to cutbacks at corporate headquarters.”

“How much the Fed will be swayed by the latest jobs report remains to be seen. The latest Beige Book, released on Wednesday, noted labor markets have tightened and also made numerous references to the troubles businesses are having at filling job openings around the country.”