THE national jobs report for May was released yesterday by the BLS, which has given pundits, economists, and others plenty of time to sift through the data and generate a discussion. First, the usual caveats. The jobs report is comprised of two monthly surveys and subject to subsequent revisions. This means the data is both volatile and likely to be adjusted in the future, and it’s best to look at long-term trends rather than month-over-month changes. With that said, from the BLS yesterday morning:
Total nonfarm payroll employment rose by 217,000 in May, and the unemployment rate was unchanged at 6.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, health care and social assistance, food services and drinking places, and transportation and warehousing.
From the household survey:
The unemployment rate held at 6.3 percent in May, following a decline of 0.4 percentage point in April. The number of unemployed persons was unchanged in May at 9.8 million. Over the year, the unemployment rate and the number of unemployed persons declined by 1.2 percentage points and 1.9 million, respectively.
And from the establishment survey:
Total nonfarm payroll employment increased by 217,000 in May, with gains in professional and business services, health care and social assistance, food services and drinking places, and transportation and warehousing. Over the prior 12 months, nonfarm payroll employment growth had averaged 197,000 per month.
We had job growth, and the private sector continues to churn out jobs. For May, private sector payrolls increased by 216,000, and are up 9.4 million since early 2010. Moreover, the U.S. has recovered all of the jobs lost during the recession.
While the unemployment rate remained constant, the U-6 rate (a more expansive measure of unemployment) fell to 12.2%, down 1.2 percentage points from a year ago, and down 5 points from the recession peak. Also, the labor force participation rate and employment population ratio held steady (a small positive, but a positive nonetheless). Similarly, marginally attached and discouraged workers remained unchanged.
While the economy experienced job growth, the quality of those jobs remains a problem. As James Pethokoukis noted on this blog yesterday:
Economic consulting firm IHS Global Insight puts a finer point on a concern I expressed in an earlier post about the quality of the US jobs recovery (and that last line is a real zinger):
While the economy has generated 2.369 million jobs over the past year, a major concern remains the quality of these jobs. Of these jobs, 388,000 were in administrative and waste services (which include temporary help services); 317,000 in retail; and 311,000 in food and beverage establishments – all low-wage sectors. Key higher-paying sectors, such as manufacturing, government and financial services contributed very little to this annual growth.
Employment growth in the construction and manufacturing industries continues to lag other major sectors. About a quarter of May’s job growth came from the professional and business services sector, with about half of this from professional and technical services and the other half from administrative services. The healthcare sector generated another 33,600 jobs, but a majority of these can be traced to the social assistance category, and are therefore neither high-paying nor indicative of future employment growth. These two sectors underscore the importance of services in driving solid economic growth.
With the most recent employment data, the economy has recaptured all the jobs that were lost during the recession, and is now beginning to show incremental employment growth from over six years ago. We speculate that the first such incremental job is a barista at local coffee shop — 31,700 jobs were created in food service and drinking places in May.
The following graph is from the National Employment Law Project, tracking the change in jobs by wage category from early 2008 through early 2014:
This has translated into weak wage growth for all private industry workers. Wages are growing at roughly the same pace as inflation, meaning real wages are not climbing:
While long-term unemployment continues to “improve”, it remains well above historic trends:
Moreover, the percentage of persons holding multiple part-time work is up to levels not seen since the mid-1990s, part-time work due to economic reasons (also know as involuntary part-time work) is well above those levels seen during that time period:
Persons holding multiple part-time jobs might be doing so for non-economic reasons, but the rise in these two indicators again points to slack in the labor market.
Finally, while the economy has recovered the jobs lost during the recession, there is still a jobs deficit. According to the Economic Policy Institute, accounting for potential growth in the labor force, the U.S. is still short roughly 7 million jobs. The potential labor force is simply the size of the current labor force plus the roughly 6 million missing workers who have left the labor force and are not actively seeking employment because of low job opportunities.
In short, job growth is always a positive sign, but we cannot read too much in one month of data (and data that will be revised). The longer trends show signs of (very slow) improvement, but the labor market still has plenty of slack in it–as evidenced by stagnant wages and stubbornly high, relatively speaking, rates of long-term unemployed and involuntary part-time workers. Most importantly, the U.S. is still, by one estimate, short some 7 million jobs.