May 2022 Employment Report

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The Bureau of Labor Statistics‘ (BLS) establishment survey showed nonfarm employers added 390,000 jobs in May, exceeding the 325,000 expected. However, March and April employment changes were revised down by a combined 22,000 (March: -30,000; April: +8,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) was stable at 3.6%, as the change in the number of employed (+321,000) roughly matched the expansion of the civilian labor force (+330,000). 

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Observations from the employment reports include:

* For a change, the correspondence between the establishment (+390,000 jobs) and household surveys (+321,000 employed) was good.

* Goods-producing industries added 59,000 jobs; service-providers: +331,000. Notable job gains occurred in leisure and hospitality (+84,000), professional and business services (+75,000), and transportation and warehousing (+47,000). Employment in retail trade declined (-60,700). Nonfarm employment is down by 822,000 (-0.5%) from its pre-pandemic level in February 2020. Employment is also 8.2 million below its working-age population-adjusted level relative to January 2006.

Manufacturing added 18,000 jobs. That result is at odds with the change in the Institute for Supply Management’s (ISM) manufacturing employment subindex, which retreated into contraction in May. Wood products employment rose by 3,800 (ISM was unchanged); paper and paper products: +1,100 (ISM unchanged); construction: +36,000 (ISM increased).

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* The number of employment-age persons not in the labor force receded (-211,000) to 99.3 million; that level is 4.3 million higher than in February 2020. With the labor force expanding, the employment-population ratio (EPR) edged up to 60.1%; also, the EPR is 1.1PP below the February 2020 level. 

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* Because the civilian labor force grew by 363,000 in May, the labor force participation rate advanced to 62.3%. Average hourly earnings of all private employees increased by $0.10 (to $31.95), and the year-over-year increase decelerated to +5.2%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.15, to $27.33 (+6.5% YoY). Since the average workweek for all employees on private nonfarm payrolls was unchanged at 34.6 hours, average weekly earnings rose (+$3.46) to $1,105.47 (+4.3% YoY). With the consumer price index running at an annual rate of +8.3% in April, the average worker keeps losing purchasing power. In fact, average hourly wages have lagged CPI since April 2021; average weekly wages since June 2021.

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* Full-time jobs jumped (+733,000) to 132.8 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 -- rose by 295,000, while those working part time for non-economic reasons dipped (-20,000); multiple-job holders fell by 237,000.

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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 decreased by $17.2 billion, to $246.7 billion (-2.9% MoM; +17.2% 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 11.0% 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.