Did the US economy deliver a dud in May? Not exactly, but the job creation report from the Bureau of Labor Statistics definitely cannot be described as exciting or energetic. For the fifth straight month, the economy added only a maintenance level expansion of new jobs, although that number is tempered — slightly — by expected cuts in government workers.
A couple of internal indicators show reasons for concern, emphases mine:
Total nonfarm payroll employment increased by 139,000 in May, and the unemployment rate was unchanged at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in health care, leisure and hospitality, and social assistance. Federal government continued to lose jobs. …
The number of people jobless less than 5 weeks increased by 264,000 to 2.5 million in May. The number of long-term unemployed (those jobless for 27 weeks or more) decreased over the month by 218,000 to 1.5 million. Both measures were little changed over the year. The long-term unemployed accounted for 20.4 percent of all unemployed people in May. (See table A-12.)
In May, the employment-population ratio declined by 0.3 percentage point to 59.7 percent. The labor force participation rate decreased by 0.2 percentage point to 62.4 percent. (See table A-1.)
The employment ratios moved in the wrong direction. The civilian labor force participation rate has been bouncing around between 62.4% and 62.7% for the past year, but the two lowest readings have come in the last four months. The employment-population ratio is the lowest reading since January 2022, however, and the drop should raise some concerns.
How much of this is from trimming government workers? Not much at all. The report only shows a decline of one thousand workers overall in government jobs, a measure that includes all levels of government. Federal employment declined by 22K, however. Meanwhile, professional and business services declined by 18K, manufacturing lost 8K, and overall goods-producing lost 5K.
Why aren’t more government jobs getting cut? The WSJ explains:
Trump has made slashing the federal workforce a centerpiece of his agenda, but only a fraction of those cuts were reflected in the May data. Many such workers remain on paid leave or are receiving severance pay, which means they don’t show up as unemployed. Lawsuits and court orders have also led to delays in federal job cuts.
Recent months have been roiled by the Trump White House’s efforts to slash federal jobs and spending, as well as the launch of an aggressive raft of tariffs—and their on-again, off-again application.
Is there good news in the report? Actually, yes. Wage growth actually looks a little cheerier. Hourly wages rose 0.4% in May over April, although hours worked only increased by 0.1%. And even the weaker toplines look pretty good when stacked against expectations:
Hiring decreased just slightly in May even as consumers and companies braced against tariffs and a potentially slowing economy, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls rose 139,000 for the month, above the muted Dow Jones estimate for 125,000 and the downwardly revised 147,000 that the U.S. economy added in April.
Santelli sounds a bit more excited than the data warrants, but he’s right overall. The report isn’t a win by any means, but it’s not a disaster either. Workers are still finding jobs, and their wages continue to grow — and without the pressure of inflation driving that, too. Those are good signs that the meh quality of job creation over the last few months may be reluctant to invest much in expansion while the tariff wars continue to percolate. That was always going to be a side effect of the chaotic application of those policies and the whiplash effect of on-the-fly changes to those policies as well. Its a caution for Donald Trump and his team to get these matters settled quickly so that capital investors can have confidence in the economy as soon as possible.
