Friday, June 07, 2019

Comments on May Employment Report

by Calculated Risk on 6/07/2019 10:11:00 AM

The headline jobs number at 75 thousand for May was well below consensus expectations of 180 thousand, and the previous two months were revised down 75 thousand, combined. The unemployment rate was unchanged at 3.6%. Overall this was a weak report.

Earlier: May Employment Report: 75,000 Jobs Added, 3.6% Unemployment Rate

In May, the year-over-year employment change was 2.350 million jobs. That is decent year-over-year growth.

Average Hourly Earnings

Wage growth was below expectations. From the BLS:

"In May, average hourly earnings for all employees on private nonfarm payrolls increased by 6 cents to $27.83. Over the year, average hourly earnings have increased by 3.1 percent."
Wages CES, Nominal and RealThis graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 3.1% YoY in May.

Wage growth has generally been trending up, but has weakened recently.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate was declined in May to 82.1% from 82.2% in April, and the 25 to 54 employment population ratio was unchanged at 79.7%.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) declined by 299,000 in May to 4.4 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."
The number of persons working part time for economic reasons decreased in May to 4.355 million from 4.654 million in April.   The number of persons working part time for economic reason has been generally trending down.

These workers are included in the alternate measure of labor underutilization (U-6) that declined to 7.1% in May. This is the lowest level for U-6 since the year 2000.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.230 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.305 million in March.

Summary:

The headline jobs number was well below expectations, and the previous two months were revised down.  The headline unemployment rate was unchanged at 3.6%, although U-6 declined to the lowest level since the year 2000.

Wage growth was also a little disappointing.

Overall this was a weak jobs report.   The economy added 820 thousand jobs through May 2019, down from 1,149 thousand jobs during the same period in 2018.   So job growth has slowed.