U.S. Job Growth Slows in May

Employers add 75,000 jobs, much less than expected

Roy Maurer By Roy Maurer June 7, 2019
U.S. Job Growth Slows in May

​Employers in the U.S. added 75,000 jobs in May, and the unemployment rate held at 3.6 percent, according to the latest Bureau of Labor Statistics (BLS) report.

Job creation slowed more than economists' expectations, and the previous two months' reports saw substantial downward revisions, bringing the three-month average to 151,000.

March's jobs total dropped from 189,000 to 153,000, and the April figure was scaled back to 224,000 from 263,000, for a total reduction of 75,000. Overall, payroll gains have averaged 164,000 in 2019, a decline from the 223,000 for all of 2018.

"This month's jobs growth number was one of the weakest in this recovery," said Martha Gimbel, research director for job search engine Indeed's Hiring Lab. "This looks like an economy that is slowing down, which does not mean that we're necessarily entering a recession," she said. "It does mean that we likely will not have the strength that we had in past years. While one might expect slower jobs growth at this point in the economic cycle, coming in the context of tariffs and other economic headwinds makes this number more worrisome."

The ADP Research Institute and Moody's Analytics reported June 5 that private-sector payrolls added just 27,000 new jobs in May; while the ADP survey and the BLS report are rarely perfectly aligned, the latest ADP report didn't bode well for labor market projections.

"Following an overly strong April, May marked the smallest gain since the expansion began," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

Mark Zandi, chief economist of Moody's Analytics, added that labor shortages are to blame, particularly at small companies.

Glassdoor Senior Economist Daniel Zhao noted that while the report is weaker than expected, the fundamentals of the labor market remain strong. "Today's report shows employers are taking their foot off the gas, but, it's not a hard slam on the breaks. The report is consistent with data that the expansion is slowing, but not stopping."

Tom Gimbel, the founder and CEO of Chicago-based staffing agency LaSalle Network, agreed, saying that "CEOs and the heads of HR are telling me that they are hiring, and they will continue to hire. This economy from a jobs perspective is still fantastic."

He added that employment in hospitality and recreation will surely increase this summer, and there's potential for more growth in entry-level hiring in professional services, sales, technology and health care due to the graduating class of 2019 entering the labor market.

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Hiring Slackens Across Sectors

Job growth ticked downward in both the production and service sectors. Retail jobs fell by 7,600 for a fourth straight drop while government payrolls were cut by 15,000.

Julia Pollak, a labor economist at employment marketplace ZipRecruiter, said that private-sector employers actually created 90,000 new jobs, but the overall number was offset by the public-sector losses. "Observers were expecting to see a surge in government job growth due to the hiring of Census workers, but Census hiring appears to be happening much later than usual," she said.

Manufacturing growth slowed to 3,000 jobs, compared with an average of 22,000 per month in 2018, adding to concerns that an escalating trade war could be impacting the sector.

"U.S. manufacturers, particularly automobile manufacturers, are vulnerable to the escalating trade disputes," Pollak said. "After solid gains in manufacturing employment in 2018, we have now seen very sluggish growth so far this year. Uncertainties and supply chain disruptions caused by recent trade disputes, paired with slowdowns in orders from abroad, are the likely culprits."

Another vulnerable industry at the moment is agriculture, which has been the hardest hit by recent trade disputes and falling commodity prices, Pollak continued. Farm jobs are not tracked by the BLS, but ZipRecruiter data suggest agricultural job openings are 14 percent lower so far in 2019 than they were last year.

Job expansion came primarily from professional and business services (33,000 jobs added), leisure and hospitality (26,000 jobs), health care (16,000 jobs), and construction (4,000 jobs).

"In general, the service-providing sectors are driving the largest job gains," Zhao said, "contributing 82,000 new jobs while the goods-producing sector added only 8,000 jobs."

He added that Glassdoor's Job Market Report has also seen declining job openings in manufacturing, indicating that the slowdown in the goods-producing sectors may worsen in the future.

Black Unemployment Falls Sharply

May marks the 15th consecutive month of the national unemployment rate being at or below 4 percent. The number of unemployed people slightly increased to 5.8 million over the month.

The joblessness rate dropped for black employees, from 6.7 percent to 6.2 percent, while Asian-American unemployment rose from a historically low 2.2 percent to 2.5 percent.

Unemployment held for Hispanics (4.2 percent) at the lowest point since 1973.

A broader measure of unemployment that captures the underemployed as well as those who have stopped looking for work, called U-6, ticked down from 7.3 percent to 7.1 percent, its lowest measure since December 2000.

The labor force participation rate was unchanged at 62.8 percent, while the prime-age labor force participation rate, which peaked in January at 82.6 percent, has fallen to 82.1 percent. "It's increasingly looking as though we may have exhausted the supply of workers on the sidelines looking to re-enter the workforce," Pollak said.

Wage Growth Holds

Average hourly earnings increased 6 cents in May to $27.83, remaining above 3 percent for the 10th straight month. "Wage growth remains elevated above the 3 percent mark, but the downward year-over-year move (from 3.2 percent to 3.1 percent) does raise concerns in a labor market that has seen stubbornly slow wage gains for American workers," Zhao said.

Pollak believes that wage growth will remain above 3 percent for the foreseeable future.

Job postings data on ZipRecruiter "suggests job switchers will see a nice wage boost, and new labor market entrants will get off to a strong start," she said.



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