Analysts looking for steady job growth got a rude awakening this morning from the Bureau of Labor Statistics. Instead of the expected expansion of 180,000 jobs in May, the economy only added 75,000 jobs, the second-worst performance since August 2017. Unemployment remained steady, but that’s one of the few bright spots from the jobs report:
Total nonfarm payroll employment edged up in May (+75,000), and the unemployment rate remained at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in professional and business services and in health care. …
The unemployment rate remained at 3.6 percent in May, and the number of unemployed persons was little changed at 5.9 million. …
Both the labor force participation rate, at 62.8 percent, and the employment-population ratio, at 60.6 percent, were unchanged in May.
Even worse, the BLS essentially negated the jobs that did get added in May. Their revisions for March and April reduced job growth by the same amount:
The change in total nonfarm payroll employment for March was revised down from +189,000 to +153,000, and the change for April was revised down from +263,000 to +224,000. With these revisions, employment gains in March and April combined were 75,000 less than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 151,000 per month over the last 3 months.
So the May jobs report ended up being a wash. The three-month average is a little more positive, but it’s still just a maintenance level of job creation when factoring in population expansion.
On the plus side, wages are still rising, going up six cents an hour in May and rising 3.1% over the past year. That suggests that the supply pressures on employers still exists, even if they pulled back from hiring last month — and perhaps more than predicted in the previous two months. That’s a reason for optimism, especially given that one month could be a blip.
Give ADP credit for predicting the blip, too. Earlier this week, the private payroll giant reported their estimate for job growth at just 27,000, with small businesses shedding 52,000 jobs in May. ADP also projected that manufacturing would drop 43,000 jobs, but the BLS report showed meager growth in that sector instead. Analysts clearly discounted the ADP survey — not unreasonably, perhaps — in predicted a more robust month of job growth when they should have heeded the warning.
CNBC noted one big surprise, a lack of census workers showing up in the survey:
“There were two big surprises,” Bovino said. “One, private payrolls were rather low at 90,000. But what was the biggest surprise was that census workers are not coming in.”
Reuters had earlier predicted “strong” job growth in May, but after the report wondered whether this would prompt a Fed intervention:
U.S. job growth slowed sharply in May and wages rose less than expected, suggesting the loss of momentum in economic activity was spreading to the labor market, which could increase calls for the Federal Reserve to cut interest rates this year.
The cool-off in hiring reported by the Labor Department on Friday was even before a recent escalation in trade tensions between the United States and two of its major trading partners, China and Mexico. Economists have warned that the trade fights could undermine the economy, which will celebrate 10 years of expansion next month, the longest on record.
Even if this isn’t related to the current brinksmanship with Mexico, it might make Donald Trump think twice about using the tariff stick in future disputes. Trump’s biggest case for re-election is the economy, with immigration his second-biggest. If he can get a quick win, no problem, but any extended trade war even to reduce the immigration issue is going to pull down his re-election chances. A Fed intervention likely won’t help that much, at least not in job creation.
Trump has until the end of the business day to make the tariff deadline for Monday. After today’s jobs report, he might be inclined to declare victory instead.