May 2021 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added 559,000 jobs in May (well below consensus expectations of 645,000). March and April employment changes were revised up by a combined 27,000 (March: +15,000; April: +12,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) fell by 0.3 percentage point, to 5.8%, as the ranks of the unemployed shrank (-496,000) faster than the civilian labor force (-53,000). 

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Observations from the employment reports include:

* Goods-producing industries gained only 3,000 jobs; service-providers: +556,000. Notable job gains occurred in leisure and hospitality (+292,000 -- nearly two-thirds of which were in food services and drinking places), in public and private education (+143,700), and in health care and social assistance (+45,800). Manufacturing added 23,000 jobs. That result is somewhat consistent with the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which expanded more slowly in May. Wood Products employment slipped by 100 (ISM unchanged); Paper and Paper Products: -2,100 (ISM unchanged); Construction: -20,000 (ISM increased).

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* The number of employment-age persons not in the labor force rose (160,000) to 100.3 million. Even so, the employment-population ratio (EPR) ticked up to 58.0%; i.e., nearly six out of 10 in the employment-age population are presently employed. 

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* Because the civilian labor force shrank by 53,000 in May, the labor force participation rate slipped fractionally to 61.6%. Average hourly earnings of all private employees increased by $0.15 (to $30.33), and the year-over-year increase jumped back to just +2.0%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.14, to $25.60 (+2.4% YoY). Since the average workweek for all employees on private nonfarm payrolls was unchanged at 34.9 hours, average weekly earnings increased by $5.24, to $1,058.52 (+4.3% YoY). With the consumer price index running at an annual rate of +4.2% in April, even those who are employed are -- on average -- barely keeping up with the official inflation rate.

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* Full-time jobs rose (+223,000) to 126.4 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work – inched up by 28,000, whereas those working part time for non-economic reasons advanced by 103,000; multiple-job holders jumped by 353,000.

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For a “sanity test” of the job numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in May fell by $17.5 billion, to $210.5 billion (-7.7% MoM; +22.3% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending May was 18.8% above the year-earlier average.

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.