Why next week's US jobs report may look particularly crummy

Amid mixed economic data this week including strong housing numbers and underwhelming durable good orders, all eyes are on May’s US jobs report, which will be released next Friday.

Unfortunately, that report will be skewed by an unusual event. The Bureau of Labor Statistics’ (BLS) May strike report indicated that there were over 35,100 workers newly on strike during the May reference week for the report.  Barclays’ analyst Jesse Hurwitz said this could put downward pressure on employment numbers for the month.

“The Verizon worker strike that began on April 13 and continued through the May reference week will likely depress monthly nonfarm payroll growth in next Friday’s report,” Hurwitz said on Friday.  

Economists currently estimate US companies added 160,000 jobs in May. So the strike will have a material effect on the report.

However, Hurwitz noted the net effect of the strike on overall nonfarm payroll growth might be moderated to some degree. When Verizon workers went on strike in August 2011, much of the 46,000 monthly contraction in telecommunications payrolls was offset by an almost 40,000 rise in temporary help employment as the company hired interim replacement labor.  Recent reports do indicate Verizon has hired thousands of temporary workers to cover for striking employees, but it might not be enough.

“We do not expect that the company has been able to offset as large a share of its striking workforce as in 2011,” Hurwitz said.