The May jobs report, unfortunately, reflected a disappointing tumble in new jobs with only 38,000 instead of the 162,000 that were anticipated by Wall Street (and others). While the unemployment rate slid from 5% to 4.9%, reflecting a modest decrease in unemployment, this does not make up for the highly discouraging news in job creation.
To put this information into context, April’s job report indicated the creation of 123,000 new jobs and this was significantly less than the average 200,000 monthly new jobs of the last several years. To see less than 40,000 new jobs in May is reminiscent of the worst months since 2010. This is now the third straight month with a disappointing jobs report.
What factors may have contributed to this discouraging news?
- Approximately 36,000 Verizon workers were on strike for approximately 6 weeks, so they did not report to their jobs and therefore were not included in the count.
- Because of the combination of decreased unemployment rates and drastically lower job creation, it begins to appear that there is a growing imbalance in the workforce with more people leaving the workforce and not pursuing other jobs. Perhaps there is some credence to the concept that hiring has slowed because job saturation is almost complete.
Certainly not all the news is bleak. The wage report indicates that May showed 2.5% growth.
Construction and manufacturing were most significantly impacted with a combined 25,000 jobs lost in those industries. Healthcare, government work, and retail/hospitality fields showed modest growth.
What does this mean for the Federal Reserve? Before this May jobs report issued, it was anticipated that the Federal Reserve might be making a move to increase interest rates in June. Now, such a move seems unwise and unlikely.
What the future holds is, of course, uncertain. Whether job growth rebounds now that the telecommunications strike is over is unclear. But what is known now is that for this trend to be reversed will require a reinvestment in the job market both by employers and disenfranchised workers.