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May jobs report: almost all positive, but not good enough

Summary:
May jobs report: almost all positive, but not good enough HEADLINES: 559,000 jobs added: 492,000 private sector plus 67,000 government. The alternate, and more volatile measure in the household report indicated a gain of 444,000 jobs, which factors into the unemployment and underemployment rates below.The total number of employed is still 7,629,000, or 5.0% below its pre-pandemic peak.  At the rate jobs have grown this year, it will take another 12 months for employment to completely recover.U3 unemployment rate declined -0.3% to 5.8%, compared with the January 2020 low of 3.5%.U6 underemployment rate declined -0.2% to 10.2%, compared with the January 2020 low of 6.9%.Those on temporary layoff declined -291,000 to 1,823,000.Permanent job

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May jobs report: almost all positive, but not good enough

HEADLINES:

  • 559,000 jobs added: 492,000 private sector plus 67,000 government. The alternate, and more volatile measure in the household report indicated a gain of 444,000 jobs, which factors into the unemployment and underemployment rates below.
  • The total number of employed is still 7,629,000, or 5.0% below its pre-pandemic peak.  At the rate jobs have grown this year, it will take another 12 months for employment to completely recover.
  • U3 unemployment rate declined -0.3% to 5.8%, compared with the January 2020 low of 3.5%.
  • U6 underemployment rate declined -0.2% to 10.2%, compared with the January 2020 low of 6.9%.
  • Those on temporary layoff declined -291,000 to 1,823,000.
  • Permanent job losers declined -295,000 to 3,234,000.
  • March was revised upward by 15,000, while April was revised upward by 12,000, for a net gain of 27,000 jobs compared with previous reports.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and will help us gauge how strong the rebound from the pandemic will be.  These were mainly positive: 

  • the average manufacturing workweek increased 0.1 hour to 40.5 hours. This is one of the 10 components of the LEI.
  • Manufacturing jobs gained 23,000. Since the beginning of the pandemic, manufacturing has still lost -509,000, or 4.0% of the total.
  • Construction jobs declined -20,000. Since the beginning of the pandemic,  -225,000 construction jobs have been lost, or 2.9% of the total.
  • Residential construction jobs, which are even more leading, rose by 4,400. Since the beginning of the pandemic,  32,400 jobs have been gained in this sector, or 3.9%.
  • temporary jobs rose by 4,400. Since the beginning of the pandemic, there have still been -294,100 jobs lost, or 10.0% of all temporary jobs.
  • the number of people unemployed for 5 weeks or less declined by -391,000 to 2,023,000, which is  -59,000 *less* than just before the pandemic hit.
  • Professional and business employment increased by 35,000, which is still -708,000, or about 3.3%, below its pre-pandemic peak.

Wages of non-managerial workers

  • Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.14 to $25.60, which is a 2.4% YoY gain. This contrasts with the 5%+ YoY gains recently seen, and reflects the rehiring of low-wage workers in sectors like food and beverage serving. 

Aggregate hours and wages:

  • the index of aggregate hours worked for non-managerial workers rose by 0.2%, which is a  loss of 4.3% since just before the pandemic.
  •  the index of aggregate payrolls for non-managerial workers rose by 0.7%, which is a gain of 2.2% since just before the pandemic.

Other significant data:

  • Leisure and hospitality jobs, which were the most hard-hit during the pandemic, increased 292,000, but is still -2,538,000, or 15.0% below its pre-pandemic peak.
  • Within the leisure and hospitality sector, food and drink establishments gained 186,000, but is still -1,480,400, or 12.0% below its pre-pandemic peak.
  • Full time jobs increased 223,000 in the household report.
  • Part time jobs increased 178,000 in the household report.
  • The number of job holders who were part time for economic reasons rose by 28,000 to 5,271,000, which is an increase of 873,000 since before the pandemic began.

SUMMARY

This was a very positive report, but still one which shows how far we still have to go.

Negatives were almost non-existent, consisting of declines in nonresidential construction jobs and temporary jobs (but the latter may be temps transitioning to permanent employment).

The more consistent theme, though, was that while there were gains, they weren’t nearly of the order we need for a quick recovery to pre-pandemic levels. Overall jobs are still 5% below where they were in February 2020, and the hard hit leisure and hospitality sector is 15% below its pre-pandemic peak! The upward revisions in March and April were tepid, confirming my suspicion that March may have been as much as or more of an outlier than April. This month’s number was close to the combined March and April average.

Further, the YoY gains in hourly wages have been more than eaten up by inflation. As the stimulus payments wear off, I suspect we are going to see a faltering in sales, which would not be good.

The brightest spot was the new low in short-term unemployment, which was even lower than before the pandemic, and among the 10 lowest months in the past 10 years. 

In essence, this report showed that there are very few new layoffs, but not enough new hires to keep the new expansion growing robustly.

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