Weekly Economic Trends and Indicators

The Headline:

On Friday, June 2, the Bureau of Labor Statistics (BLS) reported that the U.S. economy added 339,000 jobs during the month of May. In addition, the job numbers for March and April were revised upward by a combined total of 93,000 jobs. For the past 12 months, the economy has averaged 341,000 net new jobs per month as the labor market continues to recover jobs that were lost during the pandemic. The unemployment rate increased from 3.4% in April to 3.7% in May.

The Details:

As in recent months, service industries led the way in job growth this month. 257,000 of the jobs created in May were in the service sector. Specific industries with notable job growth include: private education and health services (97,000), professional and business services (64,000), leisure and hospitality (48,000), and transportation and warehousing (24,200). Notably, manufacturing jobs were essentially unchanged in May, which reflects the sharp increase in interest rates over the past year that is finally starting to slow the economy.

It may come as a surprise that the unemployment rate rose against the backdrop of continued robust job growth. The explanation is that while job numbers come from the establishment survey, the unemployment rate comes from a survey of households. The household survey picked up a decline in self-employment to the tune of 369,000 individuals. It is likely that at least some of these workers became employed in payroll jobs that have been created recently. However, the number of people surveyed as unemployed increased by 440,000, which is the largest monthly increase in unemployment since 2010 (with the exception of the brief COVID-19 recession). This could be an early sign of a slowing labor market.

The Context:

Overall, these figures paint a mixed picture of the labor market with the establishment survey showing continued hiring and strength in services, and a relatively flat labor market in manufacturing. The household survey with its increase in unemployment is somewhat more concerning.

The stock market rallied on the news with all the major indexes closing higher on Friday. Whether this news will put aside recession worries remains to be seen, however. Furthermore, the question of whether the Federal Reserve can pause the interest rate hikes is still open. There are enough mixed signals in this report to go either way.

Friday’s report also shows wage growth continuing to trend downward, albeit very slowly, which could be an argument for a pause in the rate hikes. However, there remains enough strength in the economy that a pause in the rate hikes, if it occurs, might be just that—a pause—not a signal that they are done.

Next week: Manufacturing update