Employment Situation: Sharply Lower Job Gains in May
June 7, 2019
Bottom Line: Nonfarm payroll growth was sharply lower than expected in May. Slower job gains were seen across industries. Health service and public education jobs were notably weaker. While 20-30k of the miss could be explained by seasonal factors not capturing earlier summer breaks, there were plenty of other sources of weakness in this report. Retail trade shed jobs, as did tech again. Additionally, there were negative revisions to both March and April data. While this is still noise at an aggregate national level and not yet a shift in trend, the jobs trend in sectors like manufacturing is now firmly slower, confirming trends seen in other manufacturing indicators. Wage gains at the aggregate level have lost momentum -- hourly earnings over the last three months were just 2.5%, well below the 2018 average of 3.3% and hour worked appears to have peaked and is moving slightly lower. Overall this was a concerning report, not yet enough to suggest a shift in the national trend but certainly enough to confirm negative trends in sectors like manufacturing. Payroll Employment rose by 75k in May, compared with market expectations for an increase of 175k. The prior 2 months were revised, lower in April by 39k and lower in March by 36k. Government jobs FELL by 15k. Consequently, private sector jobs ROSE by 90k. Private education jobs rose by 4k. State and Local education jobs fell by -14k. Overall employment is now 1.6% ABOVE its year ago level, Over the past 12 months, 2,350k jobs have been created. In May, the job gains were in Trade, Transportation & Utilities (+8k with -8k of those in Retail Trade), Professional & Business Services (+33k with the addition of 5.1k in Temp Help Services), Leisure & Hospitality (+26k), Education & Health Services (+24k), Construction (+4k), Manufacturing (+3k), Financial Activities (+2k), and Other Services (-1k). Jobs were shed in Information (-5k), and Government (-15k). The Unemployment Rate was UNCHANGED in May at 3.6%, compared with market expectations for no change to 3.6%. Household employment rose by 113k while the labor force increased by 176k, resulting in an increase in the number of unemployed of 64k. The Labor Force Participation Rate was UNCHANGED at 62.8%. The Employment-Population Ratio was UNCHANGED at 60.6%. The number of people Working Part-Time for Economic Reasons FELL by 348k to 4,241k. while Long-Term Unemployment ROSE by 68k to 1,298k (accounting for 22.0% of the unemployed), while the Mean Duration of Unemployment ROSE by 1.2 weeks to 24.1 weeks. There are now 5.9 million people officially unemployed. In addition, there are another 5,045k people who say they want a job but are not currently looking for one. Finally, another 4,241k people are working part-time because of slack economic conditions. The Index of Aggregate Hours ROSE by 0.1%, combining the modest gain in private payroll employment and the steady workweek. Hourly Earnings ROSE by 0.2% in May, below market expectations of 0.3%. Hourly earnings are now 3.1% ABOVE their year ago level. Weekly Earnings also ROSE by 0.2%, the result of the change in hourly earnings and a steady workweek. Weekly earnings are now 2.8% ABOVE their year ago level. The Average Workweek was UNCHANGED at 34.4 hours, BELOW the market consensus at 34.5 hours.
Article by Contingent Macro Advisors