Dueling May jobs reports: establishment report strong, household report pre-recessionary.

Dueling May jobs reports: establishment report strong, household report pre-recessionary

 – by New Deal democrat

My focus for this report continued to be whether the leading sectors and other indicators  continued to decline, and whether the pace of growth continued to decelerate.

The establishment side of the report was strong, with most leading indicators improving. But the household side was not just weak, it was negative, with an outright loss of jobs, and a significant increase in the unemployment rate, which turned higher YoY for the first time during this expansion.

Here’s my in depth synopsis.

HEADLINES:

• 339,000 jobs added. Private sector jobs increased 283,000. Government jobs increased by 56,000. 
• March was revised higher by 52,000 (still -19,000 below its original number) and April by 41,000, for a total of +93,000. The three month moving average increased to 282,000.
• As highlighted above, the alternate, and more volatile measure in the household report *declined* by -310,000 jobs. The YoY% gain in this report is only +1.5%.
• The U3 unemployment rate rose 0.3% to 3.7%. The civilian labor force, the denominator in the figure, rose slightly, while the numerator, the number of unemployed, rose sharply to a 12+ month high.
• U6 underemployment rate rose 0.1% to 6.7%.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn.  These were mixed:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, was unchanged at 40.7, down -0.9 hours from February peak last year of 41.6 hours.

• Manufacturing jobs decreased by -2,000.
• Construction jobs increased by 25,000.
• Residential construction jobs, which are even more leading, rose by 2,400. It nevertheless appears likely that January was the peak for this sector.

• Temporary jobs, which have generally been declining late last year, rose this month by 7,700.
• the number of people unemployed for 5 weeks or less increased 217,000 to 2,183,000.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.13, or +0.3%, to $28.75, a YoY gain of 5.0%, tying April for the lowest YoY gain since June of 2021.

Aggregate hours and wages: 

• the index of aggregate hours worked for non-managerial workers increased 0.2%.
•  the index of aggregate payrolls for non-managerial workers rose 0.7%, and increased 0.1% YoY to 6.8%, just above last month’s low since March 2021. With inflation decelerating, the working/middle classes almost certainly were able to put more money in their pockets.

Other significant data:

• Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose 48,000, -349,000, or -2.1% below their pre-pandemic peak.
• Within the leisure and hospitality sector, food and drink establishments added 33,100 jobs, and are now only -51,700, or -0.4% below their pre-pandemic peak. 
• Professional and business employment rose 64,000. This series has also been decelerating, but has stabilized in the past few months, currently up  2.5% YoY.
• The Labor Force Participation Rate was unchanged at 62.6%, vs. 63.4% in February 2020.
• The number of job holders who were part time for economic reasons declined -164,000.
• Those not in the labor force at all, but who want a job now, increased 206,000 to 5.477 million vs. its best level of 4.761 shortly before the pandemic, and vs. its post-pandemic low of 4.925 million two months ago.

SUMMARY

As is so often the case, this was a mixed report. The “employment” part was very good, both in the overall number of jobs gained, but also the increase in most leading sectors. Wages, aggregate hours, and aggregate payrolls also gained, the latter sharply. Restaurant jobs are within a month or two of finally exceeding their pre-pandemic peaks. Revisions were positive as well.

But the “household” part of the report was outright negative. Jobs were actually lost, the number of unemployed increased sharply, and the unemployment rate increased sharply as well, turning higher YoY for the first time during this expansion. The number of those who want a job but aren’t actively looking also may have reversed higher. Since March 2022, the household report has only shown a gain of 1.5%, while the establishment report has shown a job increase of 3.1%.

The establishment report was strong; the household report was pre-recessionary.

Financial markets in past fiscal crises; the “gold standard” of employment reports . . . big deceleration in Q4 of last year, Angry Bear, New Deal democrat