Talk about laying an egg. The Bureau of Labor Statistics issued its worst jobs report in more than five years as the US economy barely added any jobs at all in May. Only 38,000 jobs got added last month, while the civilian workforce participation rate hit its lowest mark in almost a year:
The unemployment rate declined by 0.3 percentage point to 4.7 percent in May, and nonfarm payroll employment changed little (+38,000), the U.S. Bureau of Labor Statistics reported today. Employment increased in health care. Mining continued to lose jobs, and employment in information decreased due to a strike.
In May, the unemployment rate declined by 0.3 percentage point to 4.7 percent, and the number of unemployed persons declined by 484,000 to 7.4 million. Both measures had shown little movement from August to April. (See table A-1.) Among the major worker groups, the unemployment rates for adult men (4.3 percent), adult women (4.2 percent), Whites (4.1 percent), and Hispanics (5.6 percent) declined in May. The rates for teenagers (16.0 percent), Blacks (8.2 percent), and Asians (4.1 percent) showed little or no change. (See tables A-1, A-2, and A-3.)
The U-3 unemployment rate dropped from 5% to 4.7%, but that’s not because of a boom in job creation. The civilian workforce declined in May by 458,000 people, lowering the denominator used in the calculation for U-3. The U-6 measure, which provides a more complete look at joblessness in the US economy (but not entirely so), remained steady at 9.7%.
The number of part-time workers in jobs for economic reasons jumped way up — an increase of 468,000, 181K of which were there because of slack work or business conditions. Another 77,000 could only find part-time work, while only 137,000 chose to work part time in May for non-economic reasons.
One can expect to hear a lot about the Verizon strike as a reason for this sharp decline in job creation, but keep some perspective on it. The strike involved 35,000 workers at Verizon, less than 10% of the overall decline in the workforce, and about equal to the 34,000-job decline in the information sector in May. It may have had a marginal impact on the BLS data, but it’s a long way off from explaining the depth of the problem in it. On top of that, BLS adjusted March and April job additions down by a combined 59,000, most of which took place before the strike began.
Remember that the population in the US grows about 2.5 million a year overall, or a little over 200,000 a month. With a civilian workforce participation rate of 62.6% — historically the worst we’ve seen since the late 1970s — we need to add 131,000 jobs a month just to keep pace with population growth. At a healthier 65%, we’d need to add 136,000 jobs a month. Anything below these numbers is actually losing ground.
The Associated Press’ Christopher Rugaber doesn’t mince words about this report. He also wonders what the Fed plans to do now:
U.S. employers drastically slowed their hiring in May, adding just 38,000, the fewest in more than 5 years and a sign of concern after the economy barely grew in the first three months of the year.
At the same time, the unemployment tumbled to 4.7 percent from 5 percent, the Labor Department said Friday in its monthly unemployment report. The rate, to its lowest point since November 2007, fell for a problematic reason: Nearly a half-million jobless Americans stopped looking for work and so were no longer officially counted as unemployed.
The much-weaker-than-expected jobs report will raise doubts that the Federal Reserve will increase the short-term interest rate it controls at its next meeting in mid-June or perhaps even at its subsequent meeting in late July. Many analysts had expected an increase by July.
The government has estimated that the economy grew at just a 0.8 percent annual rate in the January-March quarter.
Rugaber didn’t fall for the U-3 drop. Reuters didn’t bite on the Verizon strike explanation, either, at least not after its lead:
The U.S. economy created the fewest number of jobs in more than five years in May, hurt by a strike by Verizon workers and a fall in goods producing employment, pointing to labor market weakness that could make it difficult for the Federal Reserve to raise interest rates.
Nonfarm payrolls increased by only 38,000 jobs last month, the smallest gain since September 2010, the Labor Department said on Friday. Employers hired 59,000 fewer workers in March and April. The government said the month-long Verizon strike had depressed employment growth by 34,000 jobs. …
Even without the Verizon strike, payrolls would have increased by a mere 72,000.
The Verizon workers, who were considered unemployed because they did not receive a salary during the payrolls survey week, returned to their jobs on Wednesday. They are expected to boost June employment.
That’s a good point to remember. Whatever number we get in the jobs report, deduct 34K from the “job creation” that month.
Given the nature of the political environment, this report has to give Donald Trump a bit of a boost. Trump knows it too, which is why he called it “terrible” and a “bombshell” this morning. Hillary Clinton will be the continuity candidate in November, while Trump will be the disruptor. If the economy looks good, most voters will opt for continuity. If not, well … Team Hillary may want to wait a bit before measuring the drapes.