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Economy in Brief

U.S. Non-farm Payroll Growth Strong & Broad Based
by Tom Moeller June 4, 2004

Non-farm payrolls rose 248,000 in May. That about matched Consensus expectations for a 225,000 rise, but upward revisions to prior months added a further note of strength to recent reports. Payroll growth in April was revised to 346,000 from 288,000 and the March gain was revised to 353,000 from 337,000.

An increased breadth of hiring was indicated by the three-month diffusion index for private non-farm payrolls which jumped to 75.4% from 40.3% last year and from 37.0% in 2002. It was the strongest diffusion of employment growth since early 1998.

Manufacturing sector payrolls rose 32,000 following upwardly revised figures for the prior two months. Gains were widespread. The three-month diffusion index for manufacturing payrolls improved to 70.2% from just 18.6% last year and 15.5% in 2002.

Service producing payrolls rose 176,000 (1.2% y/y) despite a 27,000 worker decline in government employment (0.0% y/y). Private service payrolls rose 203,000 (1.5% y/y) and gains were broad based.

Construction jobs were strong again, up 37,000 (2.9% y/y).

The index of aggregate hours worked (employment times hours worked) rose 0.3% following an upwardly revised 0.4% April gain, up 3.1% (AR) versus 1Q.

Growth in average hourly earnings was steady at 0.3% (2.2% y/y). A 0.1% decline in factory sector earnings was offset by a 0.4% (2.1% y/y) gain in private services.

From the separate household survey the unemployment rate held steady at an expected 5.6%. Employment surged another 196,000 (0.9% y/y) and the labor force grew 233,000 (+0.3% y/y). The labor force participation rate was unchanged for the fourth month at 65.9% versus 67.1% averaged from 1997-2000.

Employment May April Y/Y 2003 2002 2001
Payroll Employment 248,000 346,000 1.0% -0.3% -1.1% 0.0%
  Manufacturing 32,000 29,000 -1.2% -4.8% -7.2% -4.8%
Average Weekly Hours 33.8 33.8 33.7 33.7 33.8 34.0
Average Hourly Earnings 0.3% 0.3% 2.2% 2.7% 2.9% 3.8%
Unemployment Rate 5.6% 5.6% 6.1% 6.0% 5.8% 4.8%
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