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At 8:30 AM EDT the all important US Unemployment Report for May will be released.  Last month the figures showed continued weakness as 20,000 non farm payroll jobs were lost.  Although this was the 4^th straight decline in jobs, the job loss was better than expected.  Although jobs were lost, the Unemployment Rate last month declined to 5.0% from 5.1% in March. 

So far the unemployment rate has been quite steady during the recent slowdown.  As a point of comparison, during the last growth slowdown from 2001-2003, the unemployment rate rose sharply, from 4.2% to 5.7%, then remained steady, before moving up again to a high of 6.3%.  So far, the gain has been fairly modest, with the employment rate rising from 4.4% to 5.0%.  Since that time, the rate has been vacillating up an down between 4.8% and 5.1%. 

 When comparing NFP changes, there was a stretch in the 2001-2002 period when Non Farm Payroll declined for 15 consecutive months.  The average jobs lost was minus 146,000 jobs.  So far, the four month average decline has been a more modest 65,000 jobs.   

Looking at the various employment sectors, Construction led the decline last month losing a total of 61,000 jobs and has now declined for 10 straight months.  As we head into the spring and summer season when construction is normally strongest, I would expect further weakness as building continues to be weak and seasonal adjustments contribute to that decline in jobs.

Manufacturing lost 46,000 jobs last month and in the process, recorded the 22nd consecutive month of job losses.  Even with increased sales overseas due to the declining dollar, the manufacturing sector continues to show weakness as evidence from the Manufacturing ISM index.  The last three months have shown a decline of 47, 48 and 46 thousand jobs.  Perhaps we see some export driven jobs showing up this month. 

The Financial Activities gained 3,000 jobs last month.  This figure was surprising given the announced layoffs in that sector.  This month may show a more negative number due to the fallout from the credit crisis. 

Government added 9,000 jobs last month.  This was below the trend in jobs for this sector.  In February the sector added 26,000 jobs.  Although government traditionally adds jobs each month, with local government tax receipts under stress due to slower economic growth, the number of hires may be showing the tighter budget constraints.

Leisure and Hospitality showed an increase of 18,000 jobs last month.  Going forward, this sector may also suffer as the slow overall economic growth starts to spread to consumers discretionary spending. 

 Finally, the Health Care sector is the one sector where the aging baby boomers will keep the job hires strong.  This sector added 52,000 jobs last month the highest increase since August 2008.  Expect to see continued strength in this sector.     

Looking at the weekly Initial and Continuing Claims statistics for the month, the Initial Claims showed steady levels for the month.  Since it is at higher levels it shows sluggish employment but not accelerating job losses. 

  The Continuing Claims showed a steady rise for most of May.  However it too is not accelerating at a faster pace.  This suggests that people are remaining unemployed, and not finding it easy to find a job.  This should lead to a higher unemployment rate but so far this has not been the case as the unemployment rate has remained steady.   The data suggests that for this month there should be another decline in jobs.  The expectation is for a decline of 60,000.  This is probably a safe, trend like estimate.   The unemployment rate is expected to rise to 5.1% from 5.0% and Average hourly earnings are expected to rise by 0.2%.  Manufacturing jobs are expected to show a decline of 40,000 jobs, up from 46,000.   

Wild cards in my opinion are less construction and manufacturing job losses which would be a positive for job gains.  On the negative side, Leisure and Hospitality and Financial Jobs could show weaker numbers.  Government should also be pressured due to budget cuts on projected lower tax receipts.

 As always, the report brings with it increased market volatility and risk.  In addition, the prior months data can be revised dramatically.  As a result, the initial few minutes can be choppy and unpredictable.  Be sure to adjust your trading to your risk tolerance.