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  • Larry Green, CFA

Expect Weaker than expected NFP adds of 126,000 vs. the consensus forecast of 180,000

Figure 1 – Active job postings are down slightly from last month continuing the downtrend

Our core analytics are based on the premise that company hiring is indicative of management's perception of the prospects for their business. A company that is posting jobs, expects to grow, and vice-versa.

This month, our core indicators (derived from the LinkUp RAW jobs dataset2) show the following:

1) Active Jobs Index continues down 1.5% m/m, and down 4.3% y/y.Note the spike drop in postings immediately following the Brexit results.

2) New Jobs Posted, rebounded nicely from last month, up 26% from last month, and up 7% from last year. This number is quite volatile month to month, but any time more jobs are being posted it is good. New Jobs continue to lag Filled Jobs. Not good.

3) Labor market slack loosened slightly from record levels last month.

4) Our Total Filled Jobs Index was up significantly from last month. This is also a very positive factor.

The net is, jobs activity rebounded somewhat from a very bad May. More Job postings were Created and Filled, with Filled again outpacing created (a situation that would only happen when companies remove job postings they have not filled, and/or management teams are not optimistic about their growth prospects in the near future.

Our Job Duration indicator currently suggests that slack is still near its tightest in the history of the LinkUp data set. We proxy labor market slack by looking at the length of time jobs are posted (thus how quickly and easily a company can fill a job). Our Job Post Duration remains near highs in virtually all macro slices of the US economy.

Despite the slight monthly rebound in some of our key analytics, we continue to believe the US has already passed the peak of the current business cycle, as evidenced by the continued tight labor market, the continued decline in Active Job Postings, and continued lagging Job Post Creation vs. Jobs Filled.

We believe that the June 2016 NFP will be 126,000 net adds, and deliver a downside surprise to the consensus 180,000 job adds. We are lower than the low Bloomberg forecast.

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