The US economy received its “wow” signal after a surprisingly stronger-than-expected May jobs report. But, as has been the case for a while, the labor arena is not as impeccable as the Bureau of Labor Statistics (BLS) reports on page one. What was uncovered underneath the hood?
What Happened to the Jobs?
Let’s comb through the leading employment figures. The US economy created 272,000 new jobs, higher than the consensus estimate of 185,000. This was higher than the 165,000 reported in April. The unemployment rate ticked up to a higher-than-expected 4%, up from 3.9% in the previous month. Average hourly earnings rose 0.4% monthly and edged up to 4.1% on a year-over-year basis. Both numbers topped estimates. The labor force participation rate dipped to 62.5% from 62.7%. Average weekly hours were in line with market forecasts: 34.3. The U-6 unemployment rate, which factors underemployed, discouraged, and long-term unemployed, was flat at 7.4%.
What sectors generated the jobs? You guessed it: government and government-dependent industries, which have accounted for around a quarter of all new jobs this year. Employment statistics showed that health care was the top job creator, with 68,000 new positions last month. This was followed by government (43,000), leisure and hospitality (42,000), professional (32,000), and social assistance (15,000). The manufacturing sector added 8,000, which was up from the downwardly revised 6,000 in April.
These are the numbers that matter most to Washington and Wall Street. What about the other details? Let’s grab a shovel and dig a little bit deeper into the monthly jobs report.
Shot Down in May
As Liberty Nation has regularly reported for the past two years, there has been an incredible divergence between the establishment and household surveys of the monthly jobs report. The former counts every job a household member has, and the latter avoids duplication in the numbers. While the establishment showed 272,000 new jobs, the household portion highlighted a decline of 408,000.
That's not all, folks. The gap between full-time and part-time employment also widened. Full-time jobs fell by 625,000, and part-time jobs surged by 286,000. The number of people working two or more jobs increased to 8.399 million.
Another notable trend has been the difference between US-born and foreign-born workers. Last month, native-born individuals lost 663,000 positions, and foreign-born workers (legal and illegal) gained 414,000 positions. EJ Antoni, a Heritage Foundation economist, remarked on this development in the labor market on X, explaining that this is one of the reasons why Americans view the economy "so terribly." He wrote on the social media platform: "They aren't the ones w/ the jobs; native-born employment is not only millions below pre-pandemic trend, but even below pre-pandemic level, while millions more foreign workers are employed today than Feb '20, and back to trend."
The statisticians took a break from the revisions last month as the March and April numbers were adjusted down by a tepid 15,000. Perhaps their Microsoft Office subscription expired, and Excel access was limited. Who knows? Still, it continued the trend of lower adjustments after the fact.
Now What?
The market reaction was mixed. Following the jobs report, the leading benchmark indexes turned negative before the opening bell. However, after a collective sigh and a shrug of the shoulders, the stocks turned modestly positive heading into the weekend. The metals puked, energy rallied, Bitcoin jumped, and US Treasury yields soared – just one of those days on Wall Street. Why such volatility? It is the usual suspect: the Federal Reserve.
The last thing the US central bank wants to see is a hotter-than-expected headline print. With inflation progress stalling, the Eccles Building does not have an excuse to trigger a quarter-point rate cut. But while stagflation threats are emerging in the US economy, the Fed insists that it does not see the “stag” or the “flation.” So, all eyes will be on June 12: the May consumer price index will be released, and the Federal Open Market Committee policy meeting will conclude. Grab the popcorn or the Pepto Bismol.
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