May jobs report - +223,000 jobs, unemployment down to 3.8%

After a disappointing April jobs report, expectations were not particularly good for May. The consensus was for 190,000 jobs to be added, with unemployment holding steady at 3.9% and hourly pay modestly increasing by 0.2% from April and 2.6% from May 2017. The report came in better than expected across the board, including the lowest unemployment number since April 2000:

Total nonfarm payroll employment increased by 223,000 in May, and the unemployment rate edged down to 3.8 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in several industries, including retail trade, health care, and construction.

The unemployment rate edged down to 3.8 percent in May, and the number of unemployed persons declined to 6.1 million. Over the year, the unemployment rate was down by 0.5 percentage point, and the number of unemployed persons declined by 772,000….

Both the labor force participation rate, at 62.7 percent, and the employment-population ratio, at 60.4 percent, changed little in May….

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.92. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.59 in May.

The change in total nonfarm payroll employment for March was revised up from +135,000 to +155,000, and the change for April was revised down from +164,000 to +159,000. With these revisions, employment gains in March and April combined were 15,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 179,000 over the last 3 months.

The participation rate did decline a rounded 0.1 percentage point from April, though when taken to the nearest hundredth, it was a 0.03-point drop. The 62.7% rate also matched the rate in May 2017. Meanwhile, the employment-population ratio increased by a rounded 0.1 percentage point, or 0.07 points rounded to the nearest hundredth. It also represents a 0.4-point increase from May 2017. Both remain near modern historical lows.

The Associated Press took a Jeckyl-and-Hyde approach to today’s news:

U.S. employers extended a streak of solid hiring in May, adding 223,000 jobs and helping lower the unemployment rate to an 18-year low of 3.8 percent.

The Labor Department says average hourly pay rose 2.7 percent from a year earlier, a slightly faster annual rate than in April. But pay growth remains below levels that are typical when the unemployment rate is this low.

Still, the report shows that the nearly 9-year old economic expansion — the second-longest on record — remains on track. Employers appear to be shrugging off recent concerns about global trade disputes.

The job market is also benefiting a wider range of Americans: The unemployment rate for high school graduates reached 3.9 percent, a 17-year low. For black Americans, it hit a record low of 5.9 percent.

The solid hiring data coincides with other evidence that the economy is on firm footing after a brief slowdown in the first three months of the year. The economy grew at a modest 2.2 percent annual rate in the January-March quarter, after three quarters that had averaged roughly 3 percent annually.

Given that, other than April 2000, unemployment has not been below 3.9% since 1969, there isn’t a lot of experience with unemployment at this level. Moreover, in the other periods when unemployment was this low, inflation was significantly higher.

There was a bit of a controversy when President Trump tweeted that he was “looking forward” to this report just over a hour before it was released, when he had already been briefed on its contents. By protocol, the Executive Branch does not comment on the jobs report until a hour after its release. Via CNBC, White House Press Secretary Sarah Huckabee Sanders claimed that Trump’s tweet was appropriate because “(h)e didn’t put the numbers out.” Part of the reason why the Executive Branch does not comment early, and why the report is embargoed until 8:30 am even as it is given to various news outlets prior to then, is that even “vague” comments can influence trading in stock futures.