Indicators next week will support the story that the economy is indeed moving ahead at a pretty good pace in the second quarter. The May ISM indicators are expected to show only a slight pullback in momentum from April, motor vehicle sales will edge up slightly, and private-sector employment is expected to clock in at about 170,000 jobs.

Adding back in the surge in federal Census workers, estimated to be close to 330,000, and subtracting some expected cuts in the state in local sector, we arrive at close to a half a million jobs in May. Recent declines in crude oil and gasoline prices are equivalent to a large tax cut, so these elements combined translate into some pretty hefty domestic spending power, at least in the short term.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, June 1 – Construction Spending (Apr.)

Construction Put in Place

• IHS Global Insight: -0.3%
• Consensus: +0.1%
• Last Actual: +0.2% (Mar.)

Construction Excl. Residential Improvements

• IHS Global Insight: -0.3%
• Last Actual: +0.7% (Mar.)

What to Look For

• Overall construction spending is expected to drop by 0.3% in April.

Implications

We are expecting another set of very weak numbers for nonresidential and multi-family construction. This should partly be offset by another strong increase (of 3–4%) in single-family construction.

Tuesday, June 1 – ISM Manufacturing Index (May)

• IHS Global Insight: 59.0
• Consensus: 59.0
• Last Actual: 60.4 (Mar.)

What to Look For

• The index should lose a bit of ground in May, but remain very healthy by past standards.

Implications

Regional surveys from Philadelphia, New York, and Chicago showed less rapid growth in May, but growth nonetheless. Order books remain solid across a number of key manufacturing industries.

Wednesday, June 2 – Motor Vehicle Sales (May)

• IHS Global Insight: 11.3 Mil.
• Consensus: 11.4 Mil.
• Last Actual: 11.2 Mil. (Apr.)

What to Look For

• Sales likely edged up to 11.3-million units in May, from 11.2 million in April.

Implications

Automakers are looking for strong sales from their month-end Memorial Day incentives to close out May on a positive note. Thus, May will be a pretty good month despite the drumbeat of negative news in the financial markets.

Thursday, June 3 – Productivity (Final Q1)

Nonfarm Business Productivity

• IHS Global Insight: +3.1%
• Consensus: +3.4%
• Last Actual: +3.6% (Preliminary Q1)

Unit Labor Costs

• IHS Global Insight: -1.1%
• Consensus: -1.5%
• Last Actual: -1.6% (Preliminary Q1)

What to Look For

• Productivity growth to be revised down from 3.6% to 3.1%, on a 0.4% downward revision to output and a 0.1% upward revision to hours.

Implications

Productivity growth is slowing from its blistering pace in 2008 and 2009, but is still moving ahead at above-trend rates. Unit labor costs are still declining, and the recent drop in commodity prices indicates that non-labor unit costs will start to decline at the end of the second quarter. Thus, profit momentum could still be sustained.

Thursday, June 3 – ISM Non-Manufacturing Index (May)

• IHS Global Insight: 55.0
• Consensus: 55.7
• Last Actual: 55.4 (Apr.)

What to Look For

• The ISM services composite index is expected to retreat mildly, to a level of about 55.0.

Implications

Freight activity continued to move up, and order volumes overall continued to climb. Employment markets improved slightly, but financial conditions were mixed—higher mortgage purchase volumes and bond prices were offset by very weak stock prices and higher bank borrowing costs.

Friday, June 4 – Employment Report (May)

Nonfarm Payrolls

• IHS Global Insight: 480,000
• Consensus: 505,000
• Last Actual: 290,000 (Apr.)

Unemployment Rate

• IHS Global Insight: 9.7%
• Consensus: 9.8%
• Last Actual: 9.9% (Apr.)

Average Hourly Earnings (All Employees)

• IHS Global Insight: 0.1%
• Consensus: 0.1%
• Last Actual: 0.0% (Apr.)

What to Look For

• Payroll employment is expected to surge higher in May, largely due to temporary hiring for the U.S. Census. We expect overall payrolls to rise by 480,000.

Implications

We are assuming 330,000 temporary Census hires by the federal government, 20,000 jobs lost in state and local government, and 170,000 added in the private sector. The private-sector figure is the one to watch. A gain of 170,000 jobs would be less than the 231,000 jobs added in April, but still enough to preserve the gradual upward trend in the labor market. We expect the unemployment rate to dip to 9.7%, from 9.9% in April, also helped by Census hires.