Comments on May Employment Report

The headline jobs number in the May employment report was above expectations, and employment for the previous two months was revised up by 93,000, combined.  The participation rate was unchanged, the employment population ratio declined slightly, and the unemployment rate increased to 3.7%.

Although the establishment survey (Current Employment Statistics - CES) showed a gain of 339 thousand jobs, the household survey (Current Population Survey - CPS) showed a loss of 310 thousand employed, pushing up the unemployment rate in May (based on CPS).

Leisure and hospitality gained 48 thousand jobs in May.  At the beginning of the pandemic, in March and April of 2020, leisure and hospitality lost 8.2 million jobs, and are now down 349 thousand jobs since February 2020.  So, leisure and hospitality has now added back about 96% all of the jobs lost in March and April 2020. 

Construction employment increased 25 thousand and is now 320 thousand above the pre-pandemic level. 

Manufacturing employment decreased 2 thousand jobs and is now 199 thousand above the pre-pandemic level.

Earlier: May Employment Report: 339 thousand Jobs, 3.7% Unemployment Rate

In May, the year-over-year employment change was 4.06 million jobs.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate is impacted by both cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

The 25 to 54 participation rate was increased in May to 83.4% from 83.3% in April, and the 25 to 54 employment population ratio decreased to 80.7% from 80.8% the previous month.

Both are slightly above the pre-pandemic levels and suggest all of the prime age workers have returned to the labor force.

Average Hourly Wages

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).  

There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 4.3% YoY in May. 

Year-over-year wage growth will likely slow further over the next couple of months since wage growth was strong in June and July 2022.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons, at 3.7 million, changed little in May. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."

The number of persons working part time for economic reasons decreased in April to 3.739 million from 3.903 million in April. This is below pre-recession levels.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 6.7% from 6.6% in the previous month. This is down from the record high in April 22.9% and up slightly from the lowest level on record (seasonally adjusted) in December 2022 (6.5%). (This series started in 1994). This measure is below the level in February 2020 (pre-pandemic).

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.188 million workers who have been unemployed for more than 26 weeks and still want a job, up from 1.156 million the previous month.

This is at pre-pandemic levels.

Summary:

The headline monthly jobs number was well above expectations, and employment for the previous two months was revised up by 93,000, combined.   

Overall, this was another strong employment report, however, the unemployment rate increased due to fewer people employed in the household survey.