Economy Adds Disappointing 75K jobs in May; Unemployment Rate Holds at 3.6%

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Number of payroll jobs INCREASED 75,000 in April
  • Unemployment rate in May REMAINED at 3.6 percent;
  • Average weekly earnings INCREASED $2.06 in May to $957.35, a 2.8 percent year-year gain;
  • Average hourly earnings GREW 06¢, in May to $27.83 a 3.1 percent annual increase
  • Private sector jobs INCREASED 90,000; Government payrolls FELL 15,000;
  • Prior month job totals were revised down, an aggregate 75,000 wiping out the May increase in jobs: the number of new jobs in April was revised from 263,000 to 224,000, down 39,000, the number of new jobs in March was revised down 36,000 to a gain of 153,000;
  • The number of persons unemployed ROSE 64,000 to 5.89 million while the number of persons employed INCREASED 113,000; The Labor Force therefore ROSE 176,000;
  • The number of persons not in the labor force DECLINED 8,000 to 96,215;
  • Labor force participation rate REMAINED at 62.8 percent, matching the rate one year ago;
  • By sector number of retail jobs FELL 7,600; the number of information sector jobs DROPPED 5,000;
  • The number of Professional and Business Service jobs ROSE 33,000 in May, down sharply from the 62,000-job growth in April; similarly, the number of education and health jobs GREW by 24,000 in May compared with 55,900 in April;
  • Governments shed 15,000 jobs led by a DROP of 10,000 jobs by state governments and a DECLINE of 9,000 local government jobs. The federal government ADDED 4,000 jobs.

Trends:

  • Payroll jobs were up for the 104th straight month
  • The year-year growth in average hourly earnings, while relatively strong at 3.1 percent, was below the average year-year growth of the last six months: 3.3 percent;
  • Month-month payroll job growth was the third weakest of the Trump Administration: jobs grew by 18,000 in September 2017 following devastating hurricanes and 56,000in February;
  • The number of persons working full-time FELL for the third straight month for the first time since October 2009 when the number of full-time workers declined for the 13th straight month.

Data Source: Bureau of Labor Statistics

Image result for labor market

There were several disappointments in the May Employment Situation release: beyond the third weakest month-month job gain in the 28-month old Trump Administration, economists who had been hoping for some clue jobs numbers as to the impact of higher tariffs came away empty-handed.

The actual numbers – less than half the new jobs forecasters had anticipated – showed a weakening labor market even among the stronger industry sectors such as professional and business services which added 33,000 jobs in May down from 62,000 in April but the number of new jobs in the sector was revised down a combined 24,000 for March and April reducing the impact and significance of the May increase.

The jobsn report adds to the concerns of the Federal Reserve which has indicated it is weighing the impact of tariff increases and could use them as an excuse to cut interest rates to stimulate the economy through the Federal Open Market Committee. Some observers have suggested the FOMC’s recent rate increases were designed to give the policy-makers room to cut rates.

The May report showed the health care sector added a respectable 24,100 jobs, respectable until compared with the average monthly gain of 53,000 over the previous three months.

The reduction of 15,000 government jobs in May came after revisions to March and April numbers reduced the number of government jobs (at all levels) by 18,000.

While earnings growth appeared strong, they were buoyed artificially by weakness in the one of the two lowest paying sectors, retail and leisure-and-hospitality. The number of retail jobs fell 7,600 – the fourth straight month-month decline – while the number of leisure and hospitality jobs – which include low-paid restaurant workers – increased 26,000 (16,900 of which were restaurant jobs).

The number of re-entrants to the labor – who are counted as unemployed – fell 56,000after dropping 81,000 in April suggesting discouragement or frustration in efforts to land a job.

Meanwhile, the duration of unemployment rose for the fourth straight month, to 24.1 weeks, the highest since last September. In context, at the worst point of the Great Recession, the average duration of unemployment topped out at 40.7 weeks in July 2011.

The number of temp and part time jobs grew in May by almost 53,000 suggesting employer reluctance to make permanent full-time staff additions.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

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