BLS Shocker May 2016 Job Growth Way Below Expectations

By Roy Maurer Jun 3, 2016
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U.S. employers added just 38,000 jobs in May 2016, a total far less than economists had expected and the lowest monthly jobs total since September 2010.

The latest Bureau of Labor Statistics (BLS) report on new jobs came in at more than 100,000 shy of economists’ low ranges prior to the report’s release on June 3.

Released June 2, ADP’s employment report showed 173,000 new jobs in May. This is remarkable because the ADP and BLS reports can usually be counted on to approximate one another. The BLS report also revised downward their March and April totals by a combined 59,000.

“This dramatic decline in job growth is surprising,” said Tara Sinclair, chief economist for job search site Indeed. “But while the numbers are much weaker than expected, we should never panic over just one number or month.”

Jennifer Schramm, SHRM-SCP, manager of workforce trends at the Society for Human Resource Management, said that possible culprits for the low May jobs number include the nationwide six-and-a-half-week Verizon workers’ strike which led to 35,000 jobs being counted as losses and economists using the earlier unadjusted higher BLS jobs totals from March and April when calculating their predictions for May.

The Verizon strike played a role in the overall loss of added jobs, but “that was already factored in to the [much higher] forecasts and the low jobs total is not just due to that one issue,” Sinclair said.

Other aspects of the report are positive on first glance: the unemployment rate fell to 4.7 percent, the lowest since November 2007 and hourly wages rose by 5 cents to $25.59. But the lower unemployment figure is likely due to more Americans dropping out of the labor force, and wage increases fell from 9 cents the previous month.

The labor market is clearly in a mild slowing trend, said Andrew Chamberlain, chief economist for employer review and job search site Glassdoor. “Despite wage growth picking up and unemployment at the lowest it has been in a decade, the broad-based job losses in many industries should give Fed policymakers pause as they consider further raising interest rates this summer.”

The Federal Reserve is scheduled to meet later this month to discuss raising interest rates. Many economists were expecting an increase. But after this report, a June interest rate hike “has to be off the table,” Sinclair said.

The revised average monthly jobs growth is now 116,000 over the past 3 months and the average for the prior 12-month period is 247,000. 

“Either the political landscape and global concerns are holding employers back from hiring, or people don’t want the available jobs,” Sinclair said.

Health Care Gains Offset by Losses in Many Sectors

Health care employers added 46,000 jobs in May, with increases primarily occurring in ambulatory health care services (+24,000) and hospitals (+17,000). Professional and technical services added 26,000 jobs, retailers added 11,400 jobs, and leisure and hospitality employers added 11,000 jobs.

But many sectors reported net losses, including temporary help services (-21,000 jobs), durable goods manufacturing (-18,000 jobs), construction (-15,000 jobs), mining and logging (-11,000 jobs), and wholesale trade (-10,300 jobs).

Unemployment Falls

The unemployment rate declined from 5.0 percent in April 2016 to 4.7 percent in May, but experts believe this was largely due to people dropping out of the labor force. “The labor force participation rate—which is the fraction of Americans in the workforce—fell by 0.2 percent to 62.8 percent,” Chamberlain said. “It’s likely that some of the drop in the unemployment rate today reflects these workers leaving the labor force.”

The number of unemployed individuals declined by 484,000 to 7.4 million. Among demographic groups, the unemployment rates for adult men (4.3 percent), adult women (4.2 percent), Hispanics (5.6 percent) and Whites (4.1 percent) declined in May. The rates for Asians (4.1 percent), Blacks (8.2 percent) and teenagers (16.0 percent) showed little or no change.

The number of long-term unemployed (those jobless for 27 weeks or more) declined by 178,000 to 1.9 million in May. These individuals accounted for 25.1 percent of the unemployed.

There are a couple of bright spots in the BLS report. “Because of the overall mixed picture economists are likely to pay more attention to the wages data and the broader unemployment measure that takes into account those marginally attached to the labor market for more clues about the state of the job market and economy,” Schramm said. “The marginally attached measure has remained fairly steady and did not show a decline this month, and while there was no change in the average workweek, there was a slight increase in hourly wages.”

Chamberlain said that while the “healthy 2.5 percent year-over-year pace is still below the 3-4 percent annual wage growth of normal times, it is consistent with the slow upward trajectory we’ve seen in wage growth over the past year.”

Roy Maurer is an online editor/manager for SHRM.

Follow him @SHRMRoy

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