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According
to the Bureau of Labor
Statistics’s (BLS ) establishment survey, non-farm payroll employment increased
by 175,000 in May. Also, the unemployment rate (based upon the BLS ’s household survey) ticked back up to 7.6 percent as more job seekers
reentered the workforce. The job gains were slightly better than MarketWatch’s
expectations of 164,000.
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Employment
rose in professional and business services, food services and drinking places,
and retail trade; in fact, 122,000 of the 175,000 jobs added in May were those that
generally command below-average
wages). Manufacturing, meanwhile, shrank by 8,000 jobs. Government employment contracted at
the federal and state levels. The change in total non-farm payroll employment
for March was revised from +138,000 to +142,000, and the change for April was
revised from +165,000 to +149,000. With these revisions, employment gains in
March and April combined were 12,000 less than previously reported.
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Other
internals of the report were (at
this point, no longer surprisingly) weak. Granted, the employment-population
ratio rose slightly at the same time the number of persons not in the labor force
retreated from its recent peak. However, these improvements are marginal and
mean job growth is keeping up with population growth but not reabsorbing the glut
of workers let go during the Great Recession. Moreover, rather ironically, the
number of unemployed
workers actually increased from 11.66 to 11.76 million.
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Average
hourly earnings rose by $0.01, resulting in a 2 percent year-over-year
increase. With CPI -U running at an official rate of 1.1
percent, wages are technically keeping up with price inflation.
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If
there was a bright side to the employment report it is that most of the jobs
reported in May were full time; the number of part-time employees actually
dropped by 12,000.
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Employment
taxes withheld continue to ramp up on a year-over-year percentage-change basis,
leaving less in consumers’ pockets.
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Employment
is converging with the previous peak at a slower pace than all prior recessions
going back to 1973; circles in the chart above indicate when previous
recoveries reached their corresponding pre-recessionary employment highs. The
economy still has 2.42 million fewer jobs than at the January 2008 peak.
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The
figure above presents a variety of forecasts related to when employment might
return to the January 2008 peak (dashed line) or converge with the number of
jobs that likely would exist had the recession not occurred (gray line). At May’s
rate of job gains, it will take until November 2014 to recapture January 2008’s
employment level (i.e., without adjusting for population growth).
Bottom
line: This jobs report was “within
or above expectations.”
Mike
Shedlock pointed fingers in a recent blog posting. “Digging under the
surface,” Shedlock wrote, “much of the drop in the unemployment rate over the
past two years is nothing but a statistical mirage coupled with a massive
increase in part-time jobs starting in October 2012 as a result of Obamacare
legislation.”
“As
a personal anecdote, I was in the Traverse City , Michigan
“I
have asked waiters in many cities similar questions over the past few months
and have received many similar answers.
“Multiply
this scene by hundreds or thousands of shops in thousands of towns and the
reduction from 32 to 25 hours coupled with additional hiring to make up the
needed hours played a significant role in distortion of normal hiring patterns
and unemployment statistics.”
The foregoing comments represent the
general economic views and analysis of Delphi Advisors,
and are provided solely for the purpose of information, instruction and
discourse. They do not constitute a solicitation or recommendation regarding
any investment.
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