Wall Street traders and politicians alike will be focusing on the Labor Department this morning as it releases closely followed jobs numbers that take on new importance following news that the U.S. economy actually shrunk over the first three months of 2015.
Here are three things to watch in the jobs numbers for May:
The headline jobs number. Economists hope for a number well north of 200,000 to ease fears after the Commerce Department, in its second estimate of growth between January and March, reported late last month that the U.S. economy shrank at an annual rate of 0.7 percent.
That followed a first estimate of anemic 0.2 percent growth. A weaker-than-expected May jobs number could spark recession fears. Many economists have already dialed back growth assumptions to 2.5 percent for the year at best.
What sectors are hiring. Job growth this year would be higher if not for the collapse in oil prices, which has led to large layoffs in the energy sector. Has it bottomed, especially with gasoline prices and crude oil prices climbing again? Economists will also be watching the manufacturing number. The sector has been hit hard by the strengthening of the U.S. dollar against foreign currencies, which makes U.S. goods and services more expensive abroad and imports cheaper at home. Hiring in both the energy and manufacturing sectors has downshifted, but economists hope the sectors will steady if not return to more robust payrolls.
Wages. The economy is nearing what economists think is full employment. As the unemployment rate has fallen over the past 18 months, wage growth has not corresponded. It’s been flat, slowly picking up of late. If it does not gain steam Democrats are in trouble come elections next year for the White House.
“Wages are growing closer to 2.5 percent today compared to the 2 percent pace that had prevailed since the recession,” said Mark Zandi, chief economist for forecaster Moody’s Analytics. “If everything sticks roughly to script, wage growth should be over 3 percent by election day.”