Economic growth in May added 339,000 jobs, again beating analysts’ expectations even as the unemployment rate recorded its sharpest rise in months, up to 3.7% from 3.4% in April. outperformed, demonstrating the strength of the US labor market.
A mixed result could be a Rorschach test for the Fed, which has raised interest rates to its projected 2023 end point of 5.1%. This gives central banks some freedom to see what they want from the economy.
Employment data released by the Labor Department on Friday confirmed the slowdown in wage growth.
The decline is bad news for workers, but good news for the Fed, whose job is to keep prices stable at the expense of higher take-home wages.
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The report also showed that black American unemployment is rising sharply, while Hispanic American unemployment is at a record low. The private labor force increased by 130,000 and the labor force participation rate stabilized at 62.6 percent.
Here’s what Friday’s jobs report tells us:
Declining self-employment may be behind surge in unemployment
Some analysts on Friday noted a rise in the number of people leaving their self-employed status to start their own businesses, suggesting that the sharp rise in the unemployment rate may be smaller than the 0.3 percentage point increase suggests. suggests that there is a
“The most prosaic explanation for the weak household numbers: 412,000 left unincorporated status as self-employed.” [while] 302,000 have incorporated as self-employed,” writes Adam Ozimek, chief economist at the Economic Innovation Group, a think tank and advocacy group.
“Self-employed person” [are] become a small business. “
Other economists took a more negative tone, pointing to general employment trends in the economy.
“The unemployment rate has gone up for all the wrong reasons. [moved] Unemployed people decrease, unemployed people decrease [found] jobs,” wrote Nick Bunker, an economist at online job platform Indeed.
Wage growth rate is on a downward trend, but low-income earners are still on an upward trend
Wages rose 0.3%, or 11 cents, to $33.44 an hour in May, the Labor Department reported. In the last 12 months wages he rose 4.3 percent. That’s down slightly from April’s annual gain of 4.4 percent.
“Nominal wage growth has definitely slowed and is now approaching 2019 levels,” University of Massachusetts Amherst economist Arin Dube confirmed online.
Dean Baker, senior economist at the Center for Policy and Economy Research, said wages had increased by 4.0% annually over the past three months and 3.9% over the past six months.
While wage growth has slowed, earners at the bottom of the income spectrum still have the highest wage gains, one of the hallmarks of the post-pandemic recovery.
Data on Friday showed wages for leisure and service workers rose 7.9% over the past three months.
“The pandemic has increased the elasticity of the labor supply to firms in the low-wage labor market, weakened the power of the job market, and created uncertainties that could move from low to high and potentially higher wages. It has facilitated rapid relative wage increases for proportionately young non-college workers, “productive jobs,” Dube wrote in a paper earlier this year.
America’s black jobs fell off a cliff in May
The black unemployment rate rose by almost a percentage point, jumping to 5.6 percent from a record low of 4.7 percent in April.
Some economists have expressed concern about the surge, warning that black Americans are often the first to lose their jobs as a recession hits the economy.
“The increase in black unemployment from 4.7 percent to 5.6 percent is a canary in the coal mine for the economy as a whole. We’re seeing what happens when consecutive rate hikes happen,” economist Raqueen Mabud of the progressive think tank Groundwork Collaborative wrote online.
Hispanic American employment moved in the opposite direction, dropping to 4% from 4.4% in April.
These figures follow an increase in vacancies to 10.1 million and a return to a 1.8x ratio of job seekers to vacancies.
Health care and professional services add the most jobs
In May, 74,600 jobs were added in the health and social assistance sector and 64,000 jobs were added in the professional services sector.
Other notable sectors contributing to May’s surge in employment include transportation and warehousing with 24,200 jobs, construction with 25,000 jobs and retail with 11,600 jobs.
Job cuts by high-tech companies have been widely reported, with 9,000 jobs lost in the information services sector. Non-durable goods makers also laid off 5,000 jobs in May.
Fed has no clear answer
A surge in jobs and a surge in unemployment are occurring simultaneously, posing challenges for the Fed ahead of its next policy meeting in June.
Fed officials are weighing whether to pause later this month a series of rapid rate hikes that began in March 2022.
While inflation is steadily declining and the economy as a whole is slowing, persistently high inflation and steady job growth are creating severe problems for the Fed.
Many market commentators said the mixed May jobs report would offer Fed officials an opportunity to pick and choose their favorite data to build the economic narrative they most want to see.
“Job gains are very strong, but unemployment is rising and wage growth is slowing,” New York Times columnist Paul Krugman wrote online Friday. “If you want to claim that the economy is overheating and need more rate hikes, you can find the data to support it. ”
Markets are now expecting the Fed to pause at its next Rate Setting Committee meeting later this month.
“There’s not much we can glean from this report. It’s probably fine, but [we] I don’t want to sound complacent. [There are] In contrast to the two previous reports, in which employment growth was uniformly impressive, there are more contradictory signs,” said Skanda G. Amarnas wrote on Friday.
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