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US Jobs Report: Mixed Signals
US Jobs Report: Mixed Signals
May’s jobs report looked confusing, with the unemployment rate jumping to 3.7% from 3.4% yet the number of jobs soaring. But the underlying data still show surprising strength. Payrolls jumped 339,000 in May from April and previous months were revised up by 93,000. Combined, that’s double what Wall Street expected. But the household survey, from which the unemployment rate is derived, showed employment down 310,000. Such divergences aren’t unheard of, and often result from differences in how the two surveys define employment. For example, the number of unincorporated self-employed and workers on unpaid absences, who aren’t counted in the payroll survey, fell sharply from a year earlier, while the number of people with more than one job rose sharply. When adjusted to the payroll definition, household employment was up 394,000, a very healthy figure.
Key Themes
Still-firm wages, solid job growth will unsettle the Fed
May’s jobs data provide little comfort to the Federal Reserve, which wants a cooler job market with softening wage pressure. Overall wages rose 0.3% in May from April, a very slight deceleration, but for nonmanagement employees only, they were up 0.5%. In the last three months, overall wages rose at an annual rate of 4% and nonmanagement earnings grew 4.9%, neither showing any deceleration. To be consistent with the Fed’s 2% inflation target, wages can probably only grow around 3% to 3.5% over time. The rise in the unemployment rate is a modest sign of increased slack in the drum-tight jobs market. Still, labor supply isn’t improving much: The overall labor force participation rate stayed at 62.6%.
Supply and demand
The unemployment rate rose to 3.7%, its highest level since October 2022. “The spike in the unemployment rate was the most troubling sign in this report. Almost half of the increase in the number of unemployed workers was due to a spike in Black unemployment,” said Nick Bunker, head of economic research at Indeed Hiring Lab. “This might be statistical noise, or it could be a sign of Black workers disproportionately bearing the brunt of a rise in joblessness.”
The labor-force participation rate for people ages 16 and over held steady last month at the highest level since the Covid-19 pandemic hit, while the share of the population that has a job fell slightly.
Overall participation might have plateaued, in large part because older Americans have dropped out of the labor force. That indicates the overall labor market could stay tight. But for prime-age people, ages 25 to 54, the participation rate matched its highest level since 2002. That suggests a still-strong labor market is attractive to Americans who aren’t in school or heading toward retirement.
Who’s hiring, who’s firing, who’s holding on:
Health care, government and professional sectors added the most jobs last month. Information shed workers, a possible reflection of a television writers’ strike.
Several sectors have hit record employment levels, including construction. Construction is typically an interest-sensitive industry but appears to be holding up well despite rising rates and high costs for materials.
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