May payrolls grew by a whopping 339k, well more than the estimate of 195k. The private sector contributed 283k of this (similar to what ADP said yesterday) vs the forecast of 168k. The prior two months were revised up by 93k in total. In contrast, the household survey said 310k jobs were lost in May and combine this with the 130k person rise in the labor force resulted in a rise in the U3 unemployment rate to 3.7% from 3.4%. The all in U6 was up one tenth to 6.7%.
The other fly is that hours worked declined again to 34.3 from 34.4 and which matches the lowest amount since 2011 not including the April 2020 Covid drop. Following the decline in the quit rate we’ve seen in JOLTS, job leavers as a % of unemployed slowed to 12.6% from 13.8% in April, 14.2% in March, 14.8% in February and 15.3% in January.
Average hourly earnings rose .3% m/o/m as expected but April was revised down by one tenth. Versus last year they are up 4.3% vs 4.4% in April. Combine this with the drop in hours worked and there was no change m/o/m in average weekly earnings, though still up 3.4% y/o/y. Earnings growth has clearly plateaued and tough comps are contributing too to the moderation (they grew by 5.5% in May 2022).
The participation rate held at 62.6%. The important 25-54 age cohort saw its participation rate tick up again to 83.4% from 83.3% and that’s above the February 2020 level.
It was the service sector that carried the month, adding 257k jobs vs 225k in April. Leisure and hospitality hired a net 48k vs 30k in April and 46k in March. After months of declines, the temp sector added 8k. Information cut 9k but we know this has been an area of jobs weakness. Private education/health stepped up its hiring. Professional business services added 64k, holding steady with April.
With goods, manufacturing shed 2k in the midst of its recession. Construction hired a net 25k vs 13k in the month before.
The birth/death model added 231k which compares with 213k in May 2022 and 204k in May 2019. Thus, not much of a difference but in turns in the economy, it overstates the contribution on the cusp of an economic downturn and understates it as the economy comes out of a recession.
Bottom line, there are some big mixed signals in this report. Firstly, with GDP growth still trending at best around 1%, this type of job growth means that productivity continues to suck wind. Secondly, the drop in hours worked is a clear message that employers are still reluctant to shed workers but at the same time has them working less because of tempered end demand. Thirdly, that household survey told a different jobs story than the headline establishment figure.
Yields are focused on the headline report and they are jumping but I still think the Fed does not hike in a few weeks.