Beating expectations again, jobs report drives home robust labor market
Nick Rummell
MANHATTAN (CN) — Employment surprised to the upside again, with the U.S. economy adding 272,000 jobs in May, well above the 190,000 most economists had predicted.
The report, released Friday morning by the U.S. Bureau of Labor Statistics, does not mark a trend since last month’s jobs report came in lower than anticipated, while March’s jobs report beat out expectations.
However, it does show a resilient jobs market with a few cracks but nothing glaringly bad, even with slight revisions to the last two jobs reports. March’s report was downgraded by 5,000 jobs while April’s was reduced by 10,000.
“The bigger-than-expected 272,000 gain in non-farm payrolls in May will soothe recent fears that the bottom has suddenly dropped out of the economy,” Paul Ashworth, chief North America economist at Capital Economics, wrote in an investor’s note.
The gains among industries were split mostly among government workers, which gained 43,000 jobs; leisure and hospitality, which increased by 42,000 jobs; and the 32,000-job increase among professional, scientific and technical services.
Hourly earnings also increased by $0.14 last month, or 0.4%, a bit more than forecast. Annualized hourly earnings have increased by 4.1%. The average workweek remained stable at 34.3 hours.
The unemployment rate increased slightly to hit 4%, up from 3.9% last month, though that was largely in line with expectations despite it being the highest since November 2021. However, the increase in unemployment was chalked up to the 408,000-job decline in household employment.
“That slump in the household survey measure will embolden the bears, who have been highlighting the growing gap with payroll employment,” Ashworth wrote.
The weekly unemployment report from the Labor Department also included some worrisome signs, noting that initial claims continue to climb, though continued claims decreased slightly to 1.66 million for the week ending May 18.
“There’s been a subtle shift in markets away from obsessing over the inflation data to worrying a bit more about economic growth in general, and the job market in particular,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance, said after the unemployment report.
Contrasting sharply with the BLS jobs report was the employment report by payroll company ADP released on Wednesday. That report, which measures jobs without estimating like the BLS report does, noted the private sector gained 152,000 jobs last month.
This marks the third consecutive month ADP posted fewer job gains, as well as another month where the report came in lower than expectations.
“Job gains and pay growth are slowing going into the second half of the year,” said ADP Chief Economist Nela Richardson in a statement. “The labor market is solid, but we’re monitoring notable pockets of weakness tied to both producers and consumers.”
The breakdown in the ADP report found that the service industries accounted for nearly all of the job gains, with 149,000 positions, while Southern states also represented the majority of the gains at 101,000 jobs added in April.
Small businesses fared poorly, losing 10,000 jobs, while medium-sized companies gained 79,000 positions and companies with more than 500 employees nabbed an additional 98,000 jobs.
Wage gains stayed mostly the same, with “job stayers” increasing their pay by 5% over the last year. Those leaving their jobs for greener pastures saw slightly less green pastures, with “job changers” getting a 7.8% raise annualized last month compared with a 9.3% annualized pay increase in April’s report.
Little change was seen in the BLS’s report on job openings and turnover, known as the JOLTS report. According to the JOLTS for April, 5.6 million Americans were hired while 5.4 million quit or left their jobs. Job openings are now down 4.1 million from the last peak in March 2022.
The ratio of open jobs to unemployed now matches pre-pandemic levels, which should help continue to moderate wage growth in the coming months, experts say.
“This is a normal job market,” said Comerica Chief Economist Bill Adams. “It’s not as easy for job seekers to find a new job as two years ago, and it’s not as hard for employers to stay fully staffed.”