June 3, 2016

May 2016 Jobs Report

Unemployment Rate: 4.7 percent

Unemployed Americans: 7.4 million

Employment and Unemployment

  1. The Department of Labor reported an unemployment rate of 4.7 percent for May, a decline of 0.3 percentage points. Today’s decline in the unemployment rate is largely attributed to more Americans dropping out of the workforce.
  2. The jobs report shows an increase of 38,000 nonfarm jobs in May. Employment for March was revised down from 208,000 to 186,000 jobs created; and April was revised down from 160,000 to 123,000. Revisions showed employers added 59,000 fewer jobs in March and April than previously estimated.
  3. Today’s job growth figure is significantly below the 158,000 new jobs predicted in by analysts, and it is lower than the 178,000 monthly average of new jobs created so far in 2016.
  4. Unemployment in May among those ages 16-19 was 16.0 percent, unchanged from the previous month. For people of Hispanic or Latino ethnicity, the unemployment rate was 5.6 percent, down 0.5 percentage points from April. For African-Americans, the unemployment rate was 8.2 percent, down 0.6 percent from the prior month.
  5. The number of long-term unemployed, those unemployed for 27 weeks or more, was 1.9 million. They account for 25.1 percent of the unemployed, down from 25.6 percent in the prior month and down from 28.7 percent a year ago.
  6. The “real” unemployment or U-6 rate is 9.7 percent, unchanged from last month. This is the total percentage of unemployed and underemployed workers.
  7. The “real” number of unemployed Americans is 15.5 million. These are people who are unemployed (7.4 million), want work but have stopped searching for a job (1.7 million), or are working part time because they cannot find full-time employment (6.4 million).  
  8. In May, employment grew by 46,000 in health care; 11,000 in leisure and hospitality; 11,400 in retail trade; and 12,000 in federal government. Employment in mining fell by 10,000 last month. Since reaching a peak in September 2014, employment in mining has fallen by 207,000. Last month, employment in manufacturing fell by 18,000, and it fell by 15,000 in construction. 
  9. According to the Federal Reserve’s Beige Book, information received from the 12 regional banks described modest economic growth in April through mid-May. Several districts noted generally optimistic outlooks, with firms expecting growth either to continue at its current pace or to increase. Construction and real estate activity generally expanded since the last report issued in April, and the overall outlook in these industries remained positive. Regional banks reported that the energy sector remained weak. Consumer spending and tourism activity was up modestly in many districts. Employment grew modestly since the last report, with tight labor markets leading to wage increases in most districts.
  10. Some defenders of the administration may discount today’s lackluster jobs report as due to the Verizon strike. However, the Wall Street Journal notes this morning that roughly 35,000 workers went on strike and Verizon hired 25,000 temporary workers, “so the impact on the jobs report will be only about a net 10,000 job losses.” 

Labor Force Participation

  1. The labor force participation rate is 62.6 percent, down 0.2 from last month and remaining near the lowest level in 38 years. The persistently low labor force participation rate shows that millions of Americans are staying on the sidelines. Since October 2013, the participation rate has largely been stuck in a narrow range of 62.5 to 63.0 percent. Prior to the recession, the rate was 66 percent. 
  2. If the labor force participation rate were the same as when President Obama took office, the unemployment rate would be 9.2 percent.
  3. The share of American adults with jobs in May was 59.7 percent, unchanged from last month. This is nearly 4 percentage points below its pre-recession peak. 
  4. In addition to a decline in the labor force participation rate, the number of persons working part time but wanting full time employment increased by 468,000 in May.
  5. After raising its main interest rate by 0.25 percent in December 2015, recent statements indicate that the Federal Reserve may be nearing another rate increase in the coming months. In an interview in late May, Fed Chair Yellen noted signs that the “economy is continuing to improve” after weak growth in the first quarter of 2016. “Growth looks to be picking up, and if that continues and the labor market continues to improve – and I expect those things to improve – we’ll continue to monitor incoming data and assess risk to the outlook … It’s appropriate for the Fed to gradually and cautiously increase over overnight interest rate over time.”
  6. Some analysts have predicted that today’s job report may delay a rate increase. The next meeting of the Federal Reserve is June 14-15. 

Wages

  1. In May, average hourly earnings for all employees on private nonfarm payrolls increased by 5 cents to $25.59. Over the year, average hourly earnings have risen by 2.5 percent.
  2. May was the 82nd straight month that year-over-year hourly wage growth has been at or below 2.5 percent. Prior to the recession, wage growth routinely exceeded three percent.