The Labor Department released its May jobs report, which shows that U.S. employers added 75,000 jobs in May, well below analyst expectations. The unemployment rate remained at 3.6% last month. Year-over-year wage growth decreased to 3.1%, which is still well ahead of the rate of inflation. U.S. employers have added to payrolls for 104 straight months, extending the longest continuous jobs expansion on record.
The Numbers
75,000: The economy added 75,000 jobs in May.
3.6%: The unemployment remained at 3.6%.
3.1%: Wages increased at a rate of 3.1% over the last year.
The Good
The 75,000 new jobs added to the economy continued the longest job expansion in U.S. history. The unemployment rate remained at 3.6%, close to a historic low. The year-over-year earnings increase was a solid 3.1%. The annual wage increase one year ago was just 2.7%.
The broadest measure of unemployment—which includes those too discouraged to look for work, plus Americans stuck in part-time jobs but who want to work full-time—fell to 7.1% in May from 7.3% in April. This rate, known as the U-6, has descended since peaking at 8.1% at the start of 2019. While hiring appears to be slowing down, the nation still enjoys an economic environment characterized by low unemployment and rising wages. The most recent report on the number of those applying for unemployment benefits showed that new jobless claims are close to a post-recession low.
The Bad
The addition of just 75,000 jobs in May was coupled with revised employment data for April and March which showed a decrease of 75,000 in the numbers previously reported. The fall off in hiring in May is part of a larger trend which indicates that labor market growth is slowing down since last year. In the first five months of 2019, the economy added an average of 164,000 jobs, down from an average gain of 223,000 for all of 2018. The share of Americans working or looking for a job was unchanged, remaining at 62.8%.
Manufacturers added only 3,000 workers to their payrolls, continuing a streak of weak hiring numbers for this sector. The retail sector, which is challenged by the rise of e-commerce, lost jobs for the fourth month in a row. The retail sector has lost 50,000 jobs since January. The proportion of prime working-age adults, those 25 to 54, who are working rose sharply in 2018. This proportion appears to be leveling off or even decreasing. It was 79.9% in February and 79.7% in May.
Some analysts point to tensions and uncertainty over trade as a possible cause of disappointing jobs report:
“It definitely looks like we’ve downshifted in the pace of job growth,” said Michael Feroli, chief U.S. economist for JPMorgan Chase & Co. “Overall it’s a disheartening report particularly since you may have some trade effects there, but a lot of the trade tensions escalated” since the reference period for the Labor Department’s surveys in the middle of the month.”
The Unknown
With possible tariffs on Mexican goods and continuing trade tension with China, many U.S. businesses are compelled to make hiring decisions without much certainty over future costs, both in the near and long term. In part fueled by trade conditions, there appears to be increasing pessimism over the potential for economic growth for the remainder of the year:
“Over all, the economy is on a fragile footing,” said Lindsey Piegza, chief economist at the investment bank Stifel. “We’re still talking about solid growth at the start of the year but that’s in the rearview mirror. The name of the game is uncertainty.”
