The May Jobs Report Sends Mixed Signals
The May Jobs Report Sends Mixed Signals
A contradictory May Jobs Report sent mixed signals about the state of the U.S. labor market. The establishment survey was a blockbuster, reporting a 339K payroll job gain; the household survey was a downer, reporting a 310K employment loss and an unusually large increase in the unemployment rate from 3.4% to 3.7%.
First, the good news.
The 339K payroll job gain was the 14th since January, 2022 to beat economists’ expectations. It was also very broad-based, with high-quality jobs added higher-wage industries, not just in the low-wage leisure and hospitality sector. The gains were led by professional & business services, the public sector, and health care.
Job growth was positive even in some unlikely industries, such as construction (despite the months-long slowdown in housing) and in transportation & warehousing (despite recent reports of a “freight recession”).
The establishment survey was not a slam-dunk, however. It showed average working hours falling to the lower end of the pre-pandemic range, wage growth cooling, and the information and manufacturing sectors shedding jobs. Together, those indicators suggest that the labor market may be slacker than top-line figures suggest. Looking ahead, more manufacturing job losses may be in store, given the steep decline in new orders registered in the two major reports on manufacturing activity released this week (the ISM Manufacturing Index and the S&P Global US Manufacturing PMI [PDF]).
The spike in the unemployment rate 3.4% to 3.7% was for bad reasons (increased job losses) more than for good reasons (increased labor force participation). The unemployment rate for Black Americans shot up from an all-time low of 4.7% last month to 5.6% in this report. That could be statistical noise, but we know that Black Americans tend to be the first to lose jobs in a recession, so this is something to watch.
The 310K employment decline in the household survey was largely driven by a decline in self-employment, or gig work, which has been falling for 3 straight months. Workers are likely trading flexibility for job security and shifting from gig work to payroll employment, at a time of rising anxiety. The decline may also reflect market exits among owner-operator truck drivers who have seen the industry become less lucrative in recent months.
One positive development in the household survey was that the labor force participation rate for prime working-age women (25-54 yrs) hit an all-time high. That’s particularly encouraging given earlier fears that service-sector job losses and school closures during the pandemic recession might disproportionately disrupt women’s careers and derail their labor market prospects.
Perhaps the main takeaway from the report—and from more granular, real-time data from the ZipRecruiter marketplace—is that labor market trends are diverging across industries and locations.
On the one hand, there’s an entertainment and travel boom. On the other, there’s a tech, media, and manufacturing downturn. On the one hand, 10 states have their lowest-ever unemployment rates. On the other hand, the west coast states have seen their unemployment rates rise so much in recent months that a localized recession may have already begun in California, Oregon, and Washington, according an important recession indicator called the Sahm Rule.
Job seekers and businesses are experiencing the current market differently, depending on where they sit.
