June 2, 2017 – The Employment Situation gives the most comprehensive look at the labor market in the U.S. This report tracks new jobs, additions or subtractions from the labor force, the unemployment rate, as well as average hourly earnings and hours worked. There are implications for consumer purchasing power, spending on goods and services, and productivity.
The Labor market had weaker gains in May of +138,000 when the consensus was +185,000. April was revised downward to 174,000 (-37,000). Some industries had healthy gains such as construction (+11,000), financial (+11,000), and professional services (+38,000); however, some declined last month such as manufacturing (-1,000), retail (-6,000), and government (-9,000). Unemployment fell one tenth again to 4.3%, the lowest it has been since 2001, down 0.1% from the consensus. The participation rate dropped 0.2% to 62.7% in May. The average workweek was unchanged and in-line with the consensus of 34.4 hours. Average hourly earnings came in at expectations (+0.2%), up 2.5% year-over-year in May, but April was revised down 0.1% to a 0.2% gain.
The drop in unemployment is a result of the participation level decreasing due to changing demographics of baby boomers retiring and students putting off work for more schooling. Payroll was down 47,000 from expectations, but the survey was taken before many schools finished, missing students that start jobs after graduation. Payroll should have stronger growth in June. While a weaker than expected month of jobs and inflationary data may cause doubt, it will not derail the Fed plan to hike rates this month.