By Gregory Heym, BHS Chief Economist and and host of Crossing The Line
It’s the first Friday of the month, so today is all about jobs.
Payrolls Rose More than Expected in May
Another month, another better-than-expected report. Employment rose by 139,000 in May, easily beating the 125,000 Dow Jones estimate. Here are the other highlights of the report:
- The unemployment rate was unchanged at 4.2%.
- Health care continued to lead employment gains, adding 62,000 workers in May. Leisure and hospitality added 48,000 workers, most of which were in restaurants and bars.
- Federal government employment fell by 22,000 last month and is down 59,000 since January.
- Wages rose by 0.4% last month and were 3.9% higher than a year ago. Both figures were higher than expected.
- Employment for March and April was revised downward by 95,000 jobs.
After Wednesday's ADP report showed an increase of just 37,000 private-sector jobs in May, President Trump called on Fed Chair Powell to lower interest rates now. While the headline number from today’s report from the BLS should make him feel better, there are a few things to be concerned about. They are:
- The downward revisions to March and April’s job growth.
- According to the household survey, the country lost 696,000 jobs in May.
- Health care continues to lead job growth.
The first point needs no explanation, so let’s talk about the other two. As you may know, the employment report comes from two sources: the payroll survey and the household survey. The payroll survey is used to determine employment and wage growth. The household survey gives us the unemployment rate, but also has its own estimate of employment. I have written extensively about the differences between the two surveys, but those who are interested can find more information on the BLS’s website.
The bottom line is different surveys have different methodologies, which can produce vastly different results. I like the payroll survey’s data, as it is a much bigger survey than the household one. But any time there is a big discrepancy—like a 139,000 gain vs. a 696,000 loss—I get a bit worried.
Why am I concerned that the health care industry is leading job growth? Because it’s not dependent on the health of the economy, and is heavily supported by the government.
In other labor news this week, we got two bits of data that seem to contradict each other. On Tuesday, we found out that the number of job openings rose by 191,000 in April to nearly 7.4 million. That was surprising, as we keep hearing a lot about layoffs and how hard it is to find a job these days. Less surprising was yesterday’s report on weekly jobless claims, which rose to their highest level in eight months. I can’t say which report is more accurate, but remember that:
- The number of job openings was calculated in April, so it’s already old news.
- Weekly data is always volatile, and jobless claims are still at historically low levels.
To sum up:
- Hiring is still decent, and wages are growing at a good pace.
- A lot of companies are still looking for workers.
- Claims for unemployment are still pretty low.
Add all that up and I’d give the labor market a B+.