May Employment Data Disappoints

Many were expecting the economic recovery to pick up steam in May with stronger hiring. Economists were expecting an increase of 536,000 (including 400,000+ temporary census workers), but the number came in below expectations at just 431,000.

From the BLS:

Total nonfarm payroll employment grew by 431,000 in May, reflecting the hiring of 411,000 temporary employees to work on Census 2010, the U.S. Bureau of Labor Statistics reported today. Private-sector employment changed little (+41,000). Manufacturing, temporary help services, and mining added jobs, while construction employment declined.  The unemployment rate edged down to 9.7 percent.

From Bloomberg:

“Job growth is going to be anemic,” said Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California.

“Remember, it requires 150,000 to 200,000 jobs in order to reduce that unemployment rate, which is a key focus for the administration,” he said in an interview with Bloomberg Radio’s Tom Keene on “Bloomberg on the Economy.”

From Calculated Risk:

Although the headline number of 431,000 payroll jobs was large, this was only 20,000 after adjusting for the 411,000 Census 2010 temporary hires. The underlying details were mixed. The positives: the unemployment rated decreased to 9.7%, the number of part time workers (for economic reasons) decreased helping to push down U-6 to 16.6% (from 17.1%), hourly wages increased (slightly), as did the average hours worked.

Negatives include the employment-population rate declining, the few payroll jobs ex-Census, and a record number of workers unemployed for more than 26 weeks. The number of long term unemployed is one of the key stories of this recession, especially since many of them are now losing their unemployment benefits.

The dotted line shows the impact of Census hiring. In May, there were 564,000 temporary 2010 Census workers on the payroll. Starting in June, the number of Census workers will decline – and the two red lines will meet later this year.

The reason the unemployment rate declined was because people left the workforce – and that is not good news. As the employment picture improves, people will return to the labor force, and that will put upward pressure on the unemployment rate.

According to the BLS, there are a record 6.763 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 4.38% of the civilian workforce. (note: records started in 1948). It does appear the increases are slowing …

Some thoughts from Felix Salmon:

Expect unemployment to remain over 9% through the midterm elections — compared to a rate of just 6.9% in November 2008, when Obama was elected. It’s that number, rather than anything going on right now in the Gulf of Mexico, which is really “Obama’s Katrina”.

Finally, from The New York Times:

Economists are hoping that the recovery of the job market will lead to improved consumer spending, which accounts for 70 percent of the economy.

But there are issues of how sustainable the job growth is. The Labor Department report said that private-sector job growth was strongest in the temporary help and manufacturing sectors. There was a net gain of 31,000 temporary service jobs in May, meaning employers are not entirely convinced they want to commit to permanent hires. And the census positions are temporary.

Employment by all levels of government rose by 390,000 in May. Jobs with state and local governments, which are grappling with budget cuts and the prospect of job losses, decreased by 22,000 in May.

Analysts said that the figures for May showed how important government spending has been in supporting the domestic economy.

“Without the government, the total number of payrolls would have barely increased by enough to cover population growth,” said Guy LeBas, the chief fixed-income strategist for Janney Montgomery Scott, in a research note.