Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  Nonfarm Payrolls Increased 339,000 in May
Posted Under: Autos • Data Watch • Employment • Inflation • Markets • Monday Morning Outlook • Bonds • Stocks
Supporting Image for Blog Post

 

Implications:   If you have followed our recent reports on the US labor market the main theme has been ambiguity, and the data in May was no different.  Once again, we have a report on the labor market with solid headlines but worrisome details.  First, the good news. Nonfarm payrolls increased 339,000 in May, easily beating the consensus expected 195,000.  On top of this, job gains from prior months were revised up by 93,000 as well, bringing the net gain to 432,000. However, if you stopped reading today’s report after these admittedly strong numbers, you wouldn’t be getting a full picture of the labor market. First, civilian employment, an alternative measure of job growth that includes small business start-ups, declined 310,000 in May.  That means the gap between what was reported by the establishment (nonfarm payrolls) and household survey (civilian employment) that make up the overall labor market report was 649,000 in May. Notably, this is one of the largest divergences between the two measures since the early days of the Pandemic. Talk about ambiguous!  The big decline in civilian employment, paired with a 130,000 person increase in the labor force, resulted in the unemployment rate rising to 3.7% in May. While it’s too early to tell, one explanation for the dichotomy between the institutional and household surveys in today’s report could be that smaller businesses are beginning to pare back their workforces while larger employers who can afford it continue to hoard labor. For example, despite the big headline gain for nonfarm payrolls, the total number of hours worked (which also comes from the institutional survey) slipped 0.1% in May.  In other words, these businesses were hiring but there was less for their workers to do.  In turn, this is consistent with our view that the labor market will be a lagging indicator as we enter the next recession.  If larger employers hoard workers to fulfill future increases in business activity, but those increases don’t come, that just means more workers will get laid off later on.  Finally, average hourly earnings increased 0.3% in May and are up 4.3% in the past year.  However, wage growth should be taken in the context of the high inflation environment we are currently in, and with consumer prices up 4.9% as of May workers are at best treading water.  Overall, today’s labor market report echoes a lot of the concerns we raised in this week’s Monday Morning Outlook. It’s easy to find surface level good news on the US economy, but the data behind the scenes leaves us feeling cautious.  In other recent news, automakers sold cars and light trucks at a 15.0 million annual rate in May, down 6.5% from April but still up 19.6% from a year ago.  In addition, sales of medium and heavy trucks hit a 558,000 annual rate in May, the fastest pace since 2019.    

Click here for a PDF version

Posted on Friday, June 2, 2023 @ 10:59 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.