Managed Service Provider (MSP)

PeopleScout U.S. Jobs Report Analysis — May 2019

The Labor Department released its May jobs report, which shows that U.S. employers added 75,000 jobs in May, well below analyst expectations. The unemployment rate remained at 3.6% last month. Year-over-year wage growth decreased to 3.1%, which is still well ahead of the rate of inflation. U.S. employers have added to payrolls for 104 straight months, extending the longest continuous jobs expansion on record.

Monthly Jobs Report Data Sheet  May 2019  OVERALL  Overall Jobs Added: +75,000 Overall Unemployment Rate:  3.6% percent (Sideways Arrow) Overall Wage Change: + 3.1 percent (Down Arrow)  INDUSTRY BREAKDOWN  (Table B-1 for Job Changes) (Table B-3 to calculate hourly wage change)  Financial Description of Industry: The financial industry includes financial, insurance and real estate employers. Jobs Change: +2,000 Hourly Wage Change: +3.6 percent  Manufacturing Description of Industry: The manufacturing industry includes employers who produce both durable and non-durable goods. Jobs Change: +3,000 Hourly Wage Change: +2.2 percent  Transportation and Warehousing Description of Industry: The transportation and warehousing industry includes air, ground and water transportation of passengers and goods, pipeline transportation and warehouse and storage. Jobs Change: -200 Hourly Wage Change: +2.3 percent  Retail Description of Industry Category: The retail industry includes motor vehicle, home furnishings, electronics, health, clothing and other retail businesses. Jobs Change: -7,600 Hourly Wage Change: +4.1 percent  Education and Health Services Description of Industry Category: The education and health services industry includes education, healthcare and social assistance. Jobs Change: +27,000 Hourly Wage Change: +1.9 percent    Leisure and Hospitality Description of Industry Category: The leisure and hospitality industry includes arts and entertainment, accommodation and food and beverage service organizations. Jobs Change: +26,000 Hourly Wage Change: +3.8 percent   Professional and Business Services Description of Industry Category: The professional and business services industry includes jobs in waste management, administrative and support services and professional positions in the legal, accounting, computer and advertising fields. Jobs Change: +33,000 Hourly Wage Change: +3.1 percent  Observations  U.S. employers added 75,000 jobs in May, well below analyst expectations of 175,000. The unemployment rate remained at 3.6 percent last month. Year-over-year wage growth fell one tenth of a percentage point to 3.1 percent which is still well ahead of the rate of inflation. U.S. employers have added to payrolls for 104 straight months, extending the longest continuous jobs expansion on record.

The Numbers

75,000: The economy added 75,000 jobs in May.

3.6%: The unemployment remained at 3.6%.

3.1%: Wages increased at a rate of 3.1% over the last year.

The Good

The 75,000 new jobs added to the economy continued the longest job expansion in U.S. history.  The unemployment rate remained at 3.6%, close to a historic low. The year-over-year earnings increase was a solid 3.1%. The annual wage increase one year ago was just 2.7%.

The broadest measure of unemployment—which includes those too discouraged to look for work, plus Americans stuck in part-time jobs but who want to work full-time—fell to 7.1% in May from 7.3% in April. This rate, known as the U-6, has descended since peaking at 8.1% at the start of 2019. While hiring appears to be slowing down, the nation still enjoys an economic environment characterized by low unemployment and rising wages. The most recent report on the number of those applying for unemployment benefits showed that new jobless claims are close to a post-recession low.

The Bad

The addition of just 75,000 jobs in May was coupled with revised employment data for April and March which showed a decrease of 75,000 in the numbers previously reported. The fall off in hiring in May is part of a larger trend which indicates that labor market growth is slowing down since last year. In the first five months of 2019, the economy added an average of 164,000 jobs, down from an average gain of 223,000 for all of 2018. The share of Americans working or looking for a job was unchanged, remaining at 62.8%.

Manufacturers added only 3,000 workers to their payrolls, continuing a streak of weak hiring numbers for this sector. The retail sector, which is challenged by the rise of e-commerce, lost jobs for the fourth month in a row. The retail sector has lost 50,000 jobs since January. The proportion of prime working-age adults, those 25 to 54, who are working rose sharply in 2018. This proportion appears to be leveling off or even decreasing. It was 79.9% in February and 79.7% in May. 

Some analysts point to tensions and uncertainty over trade as a possible cause of disappointing jobs report:

“It definitely looks like we’ve downshifted in the pace of job growth,” said Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. “Overall it’s a disheartening report particularly since you may have some trade effects there, but a lot of the trade tensions escalated” since the reference period for the Labor Department’s surveys in the middle of the month.”

The Unknown

With possible tariffs on Mexican goods and continuing trade tension with China, many U.S. businesses are compelled to make hiring decisions without much certainty over future costs, both in the near and long term. In part fueled by trade conditions, there appears to be increasing pessimism over the potential for economic growth for the remainder of the year:

“Over all, the economy is on a fragile footing,” said Lindsey Piegza, chief economist at the investment bank Stifel. “We’re still talking about solid growth at the start of the year but that’s in the rearview mirror. The name of the game is uncertainty.”

Post by David Barol