U.S. job creation remained strong in May, with payrolls increasing by 339,000, with revisions to March and April adding an additional 93,000 jobs. Over the past three months, monthly employment has increased by an average of 283,000 people, a pace consistent with a strong labor market characterized by continued strong job creation.
The unemployment rate rose from 3.4% in April to 3.7% in May. The unemployment rate has been below 4 percent since February 2022. Since then, it has hovered between 3.4% and 3.8%. This raises the question of how it is possible to combine strong job creation with rising unemployment in the same month. In fact, this is not unusual and stems from the fact that the Bureau of Labor Statistics (BLS) monthly employment report includes data from two sources: the Establishment Survey and the Household Survey. Masu. The former is a workplace (establishment) survey from which the BLS derives employee count and wage growth. The latter household survey provides results on the unemployment rate and labor force. More details on the increase in unemployment in May are below.
Turning first to the payroll numbers, Figure 1 shows the monthly employment growth (bar chart) and the three-month moving average of monthly growth (line). The average slowing trend is expected as the labor market recovery matures. The overall economy has shifted down from the very strong pace of growth that occurred as it recovered from the pandemic-induced recession. The pace of job creation is now more gradual and steady. While the CEA is always careful not to overinterpret one month’s worth of data, today’s report, along with other recent labor market data, such as strong job openings in April, shows that the job market remains strong. This suggests that the situation is tight.
A tight job market typically supports wage growth, with hourly wages rising 0.3% for the month last month and 4.3% over the past year. To better understand the recent trends in wage growth, we employ a different smoothing approach to better extract the signal from the noise: the three-month annual wage growth rate (see Figure 2) . The annual rate was about 5.5% a year ago, and it was about 4% in May this year, showing a slight downward trend.
On the other hand, Figure 3 shows hourly wage increases for all civilian workers, production workers, non-supervisory workers (80% of paid employment who are blue-collar in manufacturing or non-managerial in services), and the CPI inflation rate. This is a comparison of the three-month annual rate trends. (Note: His CPI data for May is not yet available.) A year ago, there was a very large gap between inflation and wage growth. More recently, that gap has largely closed, with real wages rising by about 1% in both wage series since June last year.
Turning to the household budget survey, the unemployment rate rose from 3.4% in April to 3.7% in May. Although this increase seems large, unemployment rate estimates can fluctuate from month to month. The unemployment rate is still very low at less than 4%, and last year it hovered between 3.4 and 3.7%. Given continued strong payroll statistics, low levels of unemployment claims, and very low layoff rates in April, this rise in unemployment is likely statistical noise and not an indication of increased layoff activity. It is thought that there is no.
While the overall labor force participation rate has remained stable, the labor force participation rate among middle-aged adults increased by a further 0.1 percentage point in May and is now at its highest level since January 2007 (Figure 4). The labor force participation rate for middle-aged women also rose in May, reaching its highest level since statistics began in 1948. While demographic aging continues to be a headwind for the overall labor supply, the continued strong recovery in labor force participation among prime-age workers is a sign of how labor force participation among prime-age workers is recovering. It shows. Strong demand in the current labor market is attracting workers.
The U.S. job market remains in a period of historically strong job creation. Although the unemployment rate rose last month, it remains at historic lows, and labor supply remains strong, especially for prime-age workers. A tight job market has led to wage increases, especially for blue-collar workers, outpacing inflation in recent months. This dynamic continues to support strong consumer spending, a fundamental strength of the U.S. economy, accounting for just under 70% of nominal GDP. While there are significant headwinds in today’s economy, today’s report confirms that the job market remains a strong tailwind.
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