U.S. Payroll Gain Is Propelled by 2010 Census Hiring, But Private-Sector Hiring Remains Soft

On the surface, the 431,000 gain in May payrolls after an unrevised 290,000 April rise looks strong but, in fact, it was not. First, the increase was raised by the one-time hiring of 411,000 Census workers. Second, the gain actually fell short of Consensus expectations for a 508,000 rise in the total. Lastly, the 41,000 gain in private sector payrolls was the weakest since January.

The shortfall in private sector was broad-based. Construction sector hiring fell 35,000 and reversed the increases in the prior two months. Private service-sector hiring rose just 37,000 following firmer gains during five of the prior six months. The weakness reflected a 6,600 decline (-0.8% y/y) in retail sector hiring, a 12,000 shortfall (-2.2% y/y) in financial sector employment and a soft 2,000 increase (-0.3% y/y) in leisure & hospitality jobs.

There were some bright spots in the hiring figures. The 29,000 rise in factory payrolls was the fifth in a row. Health care jobs rose 13,100 (1.9% y/y) though that was the weakest increase since April of last year. Finally, temporary jobs rose 31,000, on a par with the prior three months' increases but off from the earlier gains. Perhaps also salvaging the sense of disappointment in the overall payroll employment figures was the one-month diffusion index. The 54.1 figure showed that hiring was positive in more industries than not. Yet another caveat is that this was the lowest figure since January.

Also countering some sense of labor-market softness was a decline in the civilian unemployment rate to 9.7%, although that just reversed the April increase. Moreover, the decline was all due to a 322,000 shrinkage (-0.4% y/y) in the labor force, the first drop since December. Household sector employment, in fact, also declined 35,000 (-0.7% y/y) which was the first drop this year. Of note should be that the unemployment rate for ages 20-24 fell sharply to 14.7% from 17.2%. The rate for those 25 and over rose to 8.4%, its highest this year, due to expansion in the labor force. The number of employed rose a respectable 129,000 (3.8% y/y). Finally, the broadest measure of unemployment which adds marginally attached workers and those working part-time for economic reasons to the unemployed slipped to 16.6% from the 4Q '09 high of 17.3%.

Back to the establishment survey, the gain in the length of the average workweek to 34.2 hours also was encouraging. It raised the average 2Q index of aggregate hours worked (employment times hours) by 3.7% (AR) from 1Q after that quarter's 2.3% increase. That could suggest faster real GDP growth versus 3.0% in 1Q. Finally, average hourly earnings rose 0.2% and that lifted the y/y increase to 2.4% from its 2.1% low in March.

The figures referenced above are available in Haver's USECON database. Additional detail can be found in the LABOR and in the EMPL databases.

Subsidizing Job Creation in the Great Recession from the Federal Reserve Bank of New York is available  here.

Employment: 000s	May	April	March	Y/Y	2009	2008	2007
Payroll Employment	431	290	208	-0.4%	-4.3%	-0.6%	1.1%
Previous	--	290	230	--	--	--	--
Manufacturing	49	40	19	-2.1%	-11.3%	-3.4%	-2.0%
Construction	-35	14	27	-8.6%	-15.7%	-6.1%	-0.8%
Private Service Producing	37	156	101	-0.2%	-3.4%	-0.2%	1.7%
Government	390	72	50	-1.5%	0.2%	1.3%	1.1%
Average Weekly Hours	34.2	34.1	34.0	33.9 (May '09)	33.1	33.6	33.8
Average Hourly Earnings	0.3%	0.1%	0.0%	1.9%	2.7%	3.1%	3.2%
Unemployment Rate	9.7%	9.9%	9.7%	9.4%(May '09)	9.3%	5.8%	4.6%