Jun 01, 2012 at 9:09 am
The Bureau of Labor Statistics just released the employment and unemployment results for May and the results solidly confirm that the pace of job creation has once again slowed significantly.
Job growth for May came in at only 69,000 jobs, the worst month in a year. Unemployment ticked up to 8.2%, but that was largely due to more people coming back into the job market. Moreover, April’s already weak jobs number was significantly revised downward, to 77,000, a markdown of 38,000 jobs. Weekly hours worked ticked down a bit as well, further confirming the weakening labor demand story told by these numbers.
The deceleration in payroll job growth is alarmingly clear (see figure). It’s important to average the past few months to get a better feel for the underlying trend in these data. Over the past three months, net job gains have averaged 96,000 per month, compared to 252,000 in the prior three months.
These jobs data come from a survey of workplaces, while the unemployment rate comes from a household survey. As is sometimes the case, the two surveys revealed very different results in today’s release. Employment growth was strong in the HH survey—up 422,000—but analysts discount this monthly number as the underlying sample is a lot smaller and much more volatile, month-to-month.
Nevertheless, even with this job growth from the HH survey, unemployment rose because the labor force expanded and enough people already in and newly entering the job market were jobless last month to send the rate up one-tenth, to 8.2%.
I’ll get into the gory details later, but wow…as it looks today, the job market is simply not providing workers with the employment and earnings opportunities they need to get ahead. This has obvious negative implications for family budgets, but it also threatens the macro-economy. If this pace of job growth sticks, the economy will slow down from a growth rate that’s already too slow.
So, will it stick? It’s always possible with these monthly reports that some statistical anomalies are in play. A candidate in this case is weather effects, as unseasonably warm weather last winter probably moved job growth that might have occurred in May to earlier months.
If so, that would imply that taking an average of more months of data would give you a more accurate read on the true underlying pace of growth. Over the last six months, net monthly job gains have been 174,000, so a lot depends on whether the current weak trend persists.
However, while one month does not a trend make, three months do. Also, slower job growth is consistent with a number of indicators that slowed in May, along with Europe and fiscal uncertainty regarding the fiscal cliff.
In my next post, I’ll get deeper into the numbers and talk about what we should be doing about this tough situation we’ve put ourselves in by failing to apply more stimulus when the economy clearly hadn’t fully recovered from the Great Recession.
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