May Jobs report: Main Street lays an egg

- by New Deal democrat

HEADLINES:

• +38,000 jobs added (would have been 73,000 except for Verizon strike)
• U3 unemployment rate -0.3 from 5.0% to 4.7%
• U6 underemployment rate unchanged at 9.7%

Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates

• Not in Labor Force, but Want a Job Now:  up 130,000 from 5.793 million to 5.923 million
• Part time for economic reasons: up 468,000 from 5.962 million to 6.430 million
• Employment/population ratio ages 25-54: up 0.1% from 77.7% to 77.8% 
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up +$.03 from $21.46 to $21.49,  up +2.4% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

March was revised downward by -22,000.  April was also revised downward by -37,000, for a net change of -59,000. 

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed.

• the average manufacturing workweek increased from 41.7 hours to 41.8 hours.  This is one of the 10 components of the LEI.
 
• construction jobs decreased.by -15,000.  YoY construction jobs are up +23,000.  
 
• manufacturing jobs decreased by -10,000, and are down -50,000 YoY

• temporary jobs - a leading indicator for jobs overall decreased by -21,000 (this made a peak in December).


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - decreased by -338,000 from 2,545,000 to 2.239,000.  The post-recession low was set 9 months ago at 2,095,000.

Other important coincident indicators help  us paint a more complete picture of the present:

• Overtime was unchanged at 3.2 hours.
• Professional and busines s employment (generally higher- paying jobs) increased by +10,000 and are up +525,000 YoY.


• the index of aggregate hours worked in the economy rose  by 0.1 from  105.1 to 105.2 (but April was revised down substantially from 105.5)

•  the index of aggregate payrolls rose  by .2  from 128.4 to  128.6 (but April was revised down from 128.7). 

Other news included:       

• the alternate jobs number contained in the more volatile household survey decreased by -484,000 jobs.  This represents an increase  of 1,101,000  jobs YoY vs. 2,398,000 in the establishment survey.   
 
• Government jobs rose by 13,000.    

• the overall employment  to  population ratio for all ages 16 and above -was unchange d at 59.7%  m/m but is up +0.3% YoY.  
• The  labor force participation rate fell  -0.2%   from 62.8%  to  62.6%  and is now *down*  -.0.2% YoY (remember, this incl udes droves of retiring Boomers).  

 SUMMARY

This was an awful report with the saving grace of a positive jobs number, and a decrease in the unemployment rate.  Short term unemployment fell. There was also a slight increase in the core prime age e/p ratio.  If you want a positive, it is that the U3 unemployment rate typically starts to rise about half a year before a recession, so a big decrease is inconsistent with recession.

Everything else abouit this report was pre-recessionary. The vast majority of leading indicators in the report were negative. Revisions were down. Those who want a job now increased, involuntary part time work increased, construction, manufacturing, and temporary jobs were down. YoY wage growth is not acceleratiing. Even the positives in aggregate hours and payrolls are overshadowed by the big downward revisions in the prior months.

Two takeaways:  1. One bad employment report shouldn't change an economic forecast, particularly when the Labor Market Conditions INdex has been forecasting decelerating employment gains since last summer -  but it does go into the balance.

2.  This should stop the Fed dead in its tracks.