By Theresa Sheehan

PRINCETON (SMRA) – Monday is a holiday in the U.S. but the
remaining four days are packed with economic data. There won’t be much
to distract from the upcoming May data on employment and payrolls, but
the numbers will round out what is known about conditions in the second
quarter to-date.

The median estimate for May nonfarm payrolls is around an increase
of 200,000. This is roughly between the performance for the first
quarter average (+175,000 a month) and the April increase (+244,000).
The expectation for the unemployment rate is at 8.9%, down one-tenth
from April. The outlook for the labor market probably remains on a
sustained path of modest improvement. The May report Friday morning
should confirm this.

Leading up to the employment data will be a few other labor market
indicators.

The most important is likely to be the ADP National Employment
Report for May at 8:15 ET Wednesday. The readings for the last three
months have shown a fairly good correspondence to the actual payroll
data. If the May numbers point to another steady rise, it will confirm
expectations for the Friday BLS data.

Also on Wednesday, the 7:30 ET release of the Challenger report on
layoff intentions in May should offer some evidence about the health of
the labor market. Layoff activity has been quite low in recent months,
and should remain so for now. While job growth remains sluggish, job
losses have plateaued.

Initial jobless claims for the week-ended May 28 Thursday morning
could well remain elevated. Severe weather has plagued the Midwest with
widespread flooding and a series of tornados that caused pockets of
destruction. It may take a few weeks for the full extent of impact on
new filings to be seen.

The Institute for Supply Management will release its indices for
manufacturing and non-manufacturing at 10:00 ET Wednesday and Friday,
respectively. Regional data suggests there has been some slowing in the
factory sector in May, in part related to shortages in the supply chain
and also due to severe weather conditions that have hindered deliveries.

Services are likely to feel the pinch less, but consumers and
business have been expressing less confidence, and therefore are likely
to limit demand in the non-manufacturing sector. However, expansion
should continue in new orders, and employment to make modest gains.

Other indicators for manufacturing and services scheduled for
release during the week are the Chicago Purchasing Managers Business
Barometer at 9:45 ET and the Dallas Fed’s Texas Manufacturing Outlook at
10:30 ET, both Tuesday. Coming off the holiday weekend, and with more
closely-watched indicators in the days ahead, these two reports will
likely get little attention.

The report on new orders for factory goods in April mid-morning
Thursday should reflect the softness in transportation that was present
in the 3.6% decline in the data for durable goods orders. Prices for
nondurables should be a bit higher due to petroleum and chemicals
prices.

Revised first quarter data for productivity and costs will be
released at 8:30 ET Thursday. The revisions are likely to be slight as
the headline GDP number of up 1.8% released on May 26 was the same as in
the preliminary release, albeit with some revisions in the details.

The Conference Board’s Consumer Confidence Index for May is set for
10:00 ET on Tuesday. Confidence improved in the month along with more
stable gasoline prices, but it is still fragile and could easily
deteriorate again.

The S&P/Case-Shiller Home Price Index for March at 9:00 ET on
Tuesday will offer further evidence of softness in home values due to
the unfavorable conditions in the housing market in spite of low
mortgage rates. The presence of a large inventory of distressed
properties has kept valuation of homes from rising.

Data on construction for March at 10:00 ET Wednesday will be
consistent with that already available for private residential
construction, and provide some new information for public construction,
and for home renovation activity.

The presence of Monday’s Memorial Day holiday will push back the
release of the weekly measures of retail activity from Tuesday to
Wednesday.

Sales of domestically produced motor vehicles in May will be
released as available on Wednesday, and retail same-store sales
comparisons for fiscal May will be out on Thursday.

Central Bank Activity and Federal Reserve Speakers

The Bank of Canada makes its routine monetary policy announcement
at 9:00 ET Tuesday. In its April 12 statement, the Bank repeated that,
“Any further reduction in monetary policy stimulus would need to be
carefully considered.” No change in the overnight rate is expected, but
the Bank may shift its bias on policy if short-term volatility in
inflation appears to be settling into the medium-term.

The calendar of public speaking engagements for Fed policymakers is
nearly empty in the post-holiday week. The pace will probably pick up in
the subsequent week since it will be the last before the press blackout
period in advance of the June 21-22 FOMC meeting.

Treasury Auctions

The U.S. Treasury Thursday will announce the next leg of the
quarterly refunding package with new 3-year notes and a reopening of the
10-year notes and 30-year bonds. These will auction on the following
Tuesday through Thursday, and settle on Wednesday, June 15.

The Treasury is currently using extraordinary measures to keep the
debt from breaching the statutory limit. This may have an impact on the
announced sizes of the offerings of bills and/or coupons in the coming
weeks. As yet, no changes have been made in the Treasury auction
calendar.

** Stone & McCarthy Research Associates **

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