U.S. Payrolls Gain Modestly, As Jobless Rate Rises

The two headline figures from the May employment report were dreary. The Bureau of Labor Statistics stated that the 54,000 worker rise in payrolls was the weakest in nearly twelve months and noted that the unemployment rate rose to 9.1%, its highest of 2011. In addition, payroll gains in the prior two months were revised down by a collective 39,000. The latest gain in payrolls fell short of Consensus expectations for a 190,000 increase and a decline in the unemployment rate to 8.9%.

From the payroll survey, total payrolls increased just 54,000 due to broad-based weakness. Factory sector payrolls fell 5,000, the weakest showing since October. Construction payrolls also rose just 2,000, the weakest rise this year. Private service sector jobs, which account for 84% of private sector employment, rose only 80,000, the weakest gain since January. Weakness was led by an 8,500 decline (+0.7% y/y) in retail and a 6,000 decline (+1.6% y/y) in leisure & hospitality. Jobs in professional & business services rose a steady 44,000 (3.1% y/y), education & health rose 34,000 (2.3% y/y) and finance rose 3,000 (-0.4% y/y). Government sector employment continued quite weak. A 29,000 worker decline (-3.7% y/y) was led by a 28,000 drop (-1.9% y/y) in local government, then a 2,000 slip (-0.5% y/y) at the state level and a 1,000 increase (-16.5% y/y) in federal employees.

From the household survey, the rise in the unemployment rate to 9.1% reflected a 105,000 (0.3% y/y) rise in employment, which just recovered a 190,000 April decline, and a 272,000 increase (-0.4% y/y) in the labor force. Despite the labor force gain, the participation rate fell to 45.1%, the lowest since 2007. The overall unemployment rate, which includes marginally attached workers and those working part time for economic reasons, held at 15.8%. For workers aged 16 to 19, the unemployment rate was 24.2%. The median duration of unemployment lengthened to a record 39.7 weeks as 45.1% of those unemployed have been jobless for more than 27 weeks.

The diffusion index of hiring, showing the breadth of employment gain, fell to 53.6% over a one-month period but remained firm at 70.4% over a six-month span.

Average hourly earnings rose another 0.3% as earnings in the service-producing sector rose 0.3% (2.1% y/y) and factory sector earnings ticked up 0.1% (1.8% y/y).

The figures referenced above are available in Haver's USECON database. Additional detail can be found in the LABOR and in the EMPL databases. The expectation figures are from Action Economics and are in the AS1REPNA database.