Comments on May Employment Report

The headline jobs number at 223,000 for May was above consensus expectations of 185 thousand, and the previously two months were revised up by a combined 15 thousand. Overall this was a strong report.

Earlier: May Employment Report: 223,000 Jobs Added, 3.8% Unemployment Rate

In May, the year-over-year employment change was 2.363 million jobs. This is solid year-over-year growth.

Average Hourly Earnings

Wage growth was about as expected in May. From the BLS:

"In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.92. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent."

Click on graph for larger image.

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.7% YoY in May.

Wage growth had been trending up, although growth has been moving more sideways recently.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in May to 81.8%, and the 25 to 54 employment population ratio was unchanged at 79.2%.

The participation rate had been trending down for this group since the late '90s, however, with more younger workers (and fewer 50+ age workers), the prime participation rate might move up some more.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 4.9 million in May. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."

The number of persons working part time for economic reasons has been generally trending down, and the number decreased in May. The number working part time for economic reasons suggests a little slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 7.6% in May. This is the lowest level for U-6 since 2001.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.189 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.293 million in April.

This is the lowest level since June 2007.

The headline jobs number was solid and the previous two months were revised up slightly. The headline unemployment rate dropped further, to 3.8%, and U-6 is the lowest since 2007. For the first five months of 2018, job growth has been solid averaging just over 200 thousand per month.

from Calculated Risk https://ift.tt/2IZDoPs