By Paul Gomme and Peter Rupert
The BLS reported 272 thousand new jobs according to its Establishment Survey, easily beating economists’ expectations of 190 thousand reported by Bloomberg. The job gains for May exceed the average for the previous 12 months, 232 thousand. Job gains for March were revised down 5 thousand while those for April were revised down 10 thousand.
In contrast, the Household Survey indicates that the economy lost 408 thousand jobs in May. Indeed, 5 out of the last 8 months have seen the two surveys going in opposite directions.
The BLS also reported that the unemployment rate rose slightly, from 3.86% to 3.96% in May.
Meanwhile, the labor force participation rate dropped slightly, from 62.7% to 62.5%.
Average hours of work remained at 34.3 and private employment rose 229 thousand, leading to a 2.1% increase in total hours of work. Average hourly earnings climbed $0.14 and continue to lie above year over year inflation, thereby increasing real wages.
While the headline employment numbers come from the establishment survey, the labor force participation rate is calculated from a household survey, and is calculated by the number of people unemployed plus the number of people employed relative to the age 16 and over non-institutional population. Since the labor force participation rate fell, it follows that the sum of employed and unemployed people must have fallen. We also know that the number of people unemployed rose from 6.5 million to 6.65 million. Consequently, for the sum of employed and unemployed people to fall, it must be that the number of people employed fell. And that’s exactly what the Household Survey tells us. But not the Establishment Survey.
Overall, the labor market shows continued strength and will make the Fed’s decision a little more difficult. Inflation is still above the 2.0% target and with the strong economy there seems little reason to lower the rate at the next meeting. However, as we discussed above, reading the labor market is not as easy as first appears.
