555 viewsGregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Last friday ws the first of the month, so this post is all about the labor market.
339,000 Jobs Added in May
You might be thinking that’s a misprint, but it’s for real. The 339,000 jobs added last month blew away the 190,000 Dow Jones estimate, and signified the highest employment gain since January. This chart will show you the change in employment last month by industry.
Here are the other highlights of the May employment report:
- May marked the 29th straight month of job growth in the U.S.
- Job gains for March and April were revised upward by a total of 93,000.
- The unemployment rate rose from 3.4% to 3.7%.
- Wages rose 0.3% last month and are 4.3% higher than a year ago.
I’m sure your first question will be "why did the unemployment rate go up when so many jobs were added last month?" Good question. One answer could be that the labor force—or the labor force participation rate—went up. If more people were to have entered or reentered the workforce than those who found jobs last month, the unemployment rate would have gone up. But that didn’t happen.
The real reason is that the unemployment rate comes from a different survey than the job growth numbers. A survey of households is used to calculate the unemployment rate, while the employment totals are derived from payroll data.
May’s household survey showed a 310,000 decline in employment, which pushed the unemployment rate up to 3.7%. Sometimes, there can be big differences between the household and payroll surveys, usually due to self-employed people. If you’re self-employed, you don’t show up in the payroll survey but are counted in the household data. If you’re still confused, don’t worry about it. A 3.7% unemployment rate is still very low.
In other labor market news, the number of job openings unexpectedly rose to 10.1 million in April. While this data is dated—doesn’t that sound funny—it still tells us that companies remain desperate for workers. Our final bit of good news is that weekly jobless claims came in at 232,000 last week, a very low number considering all the recent layoff announcements.
The bottom line is these reports are good news, but they make us wonder if they will cause the Fed to hike rates at its meeting later this month. Recent comments made by Chairman Powell and other Fed bigwigs had us sure they would hold rates steady this month. But this great employment report—along with an increase in consumer spending in April—certainly increases the chance of yet another rate increase. Oh well, sometimes good news can turn into bad news.