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Non-Farm Payrolls Increase by 280,000 in May

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May payrolls increase

In May, non-farm payrolls increased by 280,000, topping the Wall Street estimate of 226,000. The monthly ADP National Employment Report predicted the number would come in at 201,000. Investors should remember that ADP numbers are meant to forecast the final payroll number, not the advance number.

Private payrolls increased by 262,000 in May, while government jobs rose by 18,000. Private services payrolls increased by 182,000, and manufacturing employment was flat. Construction jobs rose by 45,000, and the sector has added a total of 256,000 jobs over the past year. Health and social services employment continues to rise, driven by aging Baby Boomers.

Overall, employment continues to trend upward for professional and business services, healthcare, and retail. The strong dollar has wreaked havoc on commodity prices, making things difficult for mining employment.

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The jobs report sent bonds reeling, with the ten-year yield picking up ten basis points in yield. While the report probably doesn’t bring a June rate hike into play, it is certainly looking like September is a good possibility. Investors interested in making directional bets on interest rates should look at the iShares Barclays 20+ Year Treasury Bond Fund (TLT).

Are builders adding inventory?

The first-time homebuyer is making a comeback. This is good news for builders like PulteGroup (PHM) and D.R. Horton (DHI) that are big in entry-level housing. The growth in construction jobs may indicate that builders are beginning to add some inventory.

Most of the builders have already reported. We are now waiting to hear from builders Lennar (LEN) and KB Home (KBH), which operate on November fiscal years. Increasing job growth is key to getting the sector to some sort of historical normalcy.

Investors interested in trading in the homebuilding sector as a whole should look at the S&P SPDR Homebuilder ETF (XHB).

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