KEY TAKEAWAY:According to the Bureau of Labor Statistics (BLS) recent report, employment in the U.S. increased in May 2024 at a pace similar to the strong growth seen in the first three months of the year, gaining 272,000 additional jobs. On the other hand, the unemployment rate increased to 4.0% for the first time in two years.
Employment
In Brief: The employment numbers in May returned to the pattern of adding more than 200,000 jobs, which has been consistent since the end of 2023. This was somewhat unexpected. April had only 165,000 new jobs, and many of those anticipating a slowdown in the labor market believed that signaled its arrival.
Diving in: Other payroll survey data indicates a steady performance in the labor market, with weekly hours holding at 34.3 and estimated real wages ticking up for the first time since January. This contributes to the uncertainty about where inflation and the labor market are headed, which can slow business expansion and economic growth.
Unemployment
The Big Picture: The U-6 unemployment rate, which includes discouraged, underemployed, and unemployed workers in the country, stayed at 7.4% in May. On the other hand, the U-3 unemployment rate, which indicates only the number of unemployed people actively seeking a job, climbed to 4.0%. This is the first time in two years that the jobless rate is not below 4%.
What Does This Mean?: The increase in the U-3 unemployment rate, along with a shrinking labor force participation rate, suggests that the labor market that is cooling. After a brief reprieve, it seems the Current Population Survey, which calculates the unemployment rate, is trending differently from the payroll survey. This clouds the labor market outlook for the Federal Reserve and other policymakers.
The chart above tracks the monthly national employment figures.
The unemployment rate measures the percentage of the labor force that is currently without a job. The national unemployment rate has remained steady throughout 2023 and now into 2024, fluctuating between 3.7% and 3.9%.
U-3 unemployment rate is the most commonly reported rate in the United States, representing the number of unemployed people actively seeking a job. The U-6 rate covers discouraged, underemployed, and unemployed workers in the country.
The labor force participation rate is an estimate of an economy’s active workforce. YTD the U.S. labor force participation rate ranged between a low of 62.5% and a high of 62.8%, according to the U.S. Bureau of Labor Statistics.
How We Matched Up
Geographic Solutions: Job creation finished above Geographic Solutions' expectations of 211,000 jobs. The unemployment rate expectation of 3.9% was just below the 4.0% result.
The Wall Street Journal: The Wall Street Journal's expectations of 190,000 jobs being added to the labor market were below what was recorded in the labor market report. The unemployment rate forecast of 3.9% was only slightly under.
ADP: According to ADP’s latest estimate, the private sector added 152,000 jobs in May, compared to the 229,000 reported by the BLS.
Key Takeaway: We saw Private Education & Health Services jobs add 86,000 jobs in May, while Government and Leisure & Hospitality combined to create 85,000 jobs.
Why: Private Education & Health Services and Government have been a major driver of employment expansion over the last year and have the benefit of being inflation-proof compared to other sectors.
Stock Down: Information and Manufacturing
Key Takeaway: Information and Manufacturing industries were flat this past month with a combined 8,000 new jobs in May.
Why: Manufacturing employment has been stagnant for 8 months which carried over to May. The information sector is weighed down by job losses in telecommunications
Will job creation remain robust over the coming months?
Based on the numbers from the latest report, we anticipate employment growth will slow down but will continue to add jobs at a slower pace in the coming months. This indicates that businesses are still looking to expand but more gradually.
Do workers or employers have more power in the labor market?
Neither side has a definitive upper hand, but it appears that the decline in unfilled job openings is giving employers more influence in the job market.
How has the labor market shifted since March 2023?
The labor market has continued to add jobs without slowing down despite widespread expectations of a recession.
Geographic Solutions derives its employment forecast and unemployment rate forecast from internal data on the number of job openings, searchers, and employment and unemployment applications filed on Geographic Solutions' state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL).
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