Weekly Economic Trends and Indicators
The Headline:
On Friday, the Bureau of Labor Statistics (BLS) reported that U.S. nonfarm payroll employment increased by 272,000 in May. Once again, this was well above expectations. Most analysts expected less than 200,000. The unemployment rate was up a tenth of a percent since last month at 4.0%, the highest level since January 2022 and continuing a slow and uneven upward trend over the last year. Average hourly earnings rose about 0.4% to $34.91 while average hours were unchanged at 34.4.
In a separate report a few days ago, the BLS recently reported on payroll jobs for April in metropolitan areas including the Quad Cities metro area. Total nonfarm payroll employment in the QC was an estimated 180,800 in April, which was down about 2,100 from a year ago. The local unemployment rate was 4.0% in April, up from 3.6% in April 2023.
The Details:
As was the case last month, health care was the leading sector nationally, with 86,000 net new jobs. Also posting significant gains were leisure and hospitality, government and professional and business services. Manufacturing, as it has been for several months, was essentially flat.
The Context:
As noted above, the national employment report beat expectations. As a result, market participants view this news as being inflationary, making it less likely that the Federal Reserve will cut interest rates in the near future. In fact, the possibility of a cut in July is now almost off the table as far as the markets are concerned. According to the CME FedWatch Tool, the probability was 21% last Thursday and only 8.9% on Friday. Even a September cut is regarded as less likely after today’s news. The consensus is now September or November with a slight edge to November.
Labor market data can be tricky to read as the same news can be regarded as good or bad depending on whether you are more worried about unemployment or inflation. The fact that we have multiple labor market measures can also cloud the picture. While jobs were up in the BLS establishment survey, the number of persons employed as measured by the household survey fell by 208,000 last month, and the labor force participation rate fell by 0.2% to 62.5%. The establishment survey usually gets the most attention, but sometimes it overestimates jobs near a turning point. For this reason, and given the employment declines in many metro areas (including the Quad Cities), the picture may not be as rosy as the headline number indicates. The ADP National Employment Report, a privately produced report incorporating data from employers using ADP for payroll, showed only a 152,000 increase in private employment. If we are in a situation where the BLS report overestimates, the ADP number may be closer to the truth, which is less encouraging for the labor market, but more encouraging for inflation.
Next week: Local education statistics
