May 2011 Employment Report

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Headline numbers from the May employment report were disappointingly weak. That report showed the U.S. economy added only 54,000 nonfarm jobs, and that the unemployment rate ticked up by a 0.1 percentage point, to 9.1 percent. Taking into consideration downward revisions to the March (-27,000) and April (-12,000) data, only 15,000 jobs were added in May, which brought the change in nonfarm employment back nearly to 5 percent below the December 2007 peak.

The lion’s share of job gains occurred in two service categories -- Professional & Business Services and Education & Health Services. Job losses were concentrated at the local government level.
 

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Breaking the employment data out by full- and part-time categories showed that the number of persons employed full time fell by 142,000 in May, while the number of persons employed part time for economic reasons shrank by 52,000. One would ordinarily expect to see more full-time employees and fewer part-timers in an improving economy.

Over 6.8 million people were not counted as being in the labor force but who would like a job now -- a jump of roughly 300,000 relative to April. On a more positive note, however, the total number of persons not considered part of the labor force fell back to 85.9 million -- slightly below last month’s record above 86.2 million.

Other discouraging aspects of the report included a civilian labor force participation rate that appears anchored at 64.2 percent (a 27-year low) while the annual percentage increase in average hourly earnings of production and non-supervisory employees ticked up by 0.5 percentage point, to 2.1 percent; one might be tempted to think the earnings increase is a positive until realizing that, with the consumer price index for urban consumers rising at a 3.2 percent annual pace, wages are falling in real terms (i.e., wage increases are not keeping up with price inflation).