May Jobs Report: Dismal, Disappointing, See Also Disastrous
I noted yesterday that there were plenty of signals that the May jobs report was going to be disappointing, ranging from disappointing GDP growth in the First Quarter, an ADP report that was way off expectations, and indications that major corporations were ramping up plans for layoffs going into the summer. We also had a disappointing jobs report in April that indicated the job growth we’d seen starting back in December was not going to sustain itself into the spring. Going into this morning, the consensus forecast had been for at least 150,000 net jobs created and a drop in the unemployment rate to 8.0% from 8.1%, but by yesterday afternoon there were already indications that analysts and traders on Wall Street were preparing for bad news this morning. As it turns out, they were wise to do so, because today the Bureau Of Labor Statistics released the worst jobs report in a year:
Nonfarm payroll employment changed little in May (+69,000), and the unemployment rate was essentially unchanged at 8.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in health care, transportation and warehousing, and wholesale trade but declined in construction. Employment was little changed in most other major industries.
The number of long-term unemployed (those jobless for 27 weeks and over) rose from 5.1 to 5.4 million in May. These individuals accounted for 42.8 percent of the unemployed. (See table A-12.)
The civilian labor force participation rate increased in May by 0.2 percentage point to 63.8 percent, offsetting a decline of the same amount in April. The employment- population ratio edged up to 58.6 percent in May. (See table A-1.)
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) edged up to 8.1 million over the month. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-8.)
This was, in other words, a dismal report with no significantly good news in it. In addition to the disappointing numbers for May, we also learned that job growth in previous months was far weaker than it had appeared to be. March’s job growth, originally reported at 154,000 net jobs created, was revised downward to 143,000 jobs created. April’s number, which had clocked in at a disappointing 115,000 net jobs created, were cut back to an even worse 77,000 jobs. All of this leaves one with the clear indication that, as other economic statistics have suggested, the economy has slowed down significantly since the winter when it seemed, once again, like we were picking up steam. Of course, we’ve seen this pattern before in each of the last two years so it shouldn’t be that much of a surprise. The question is whether this pattern continues and leads us into another sluggish summer, and CNBC thinks the answer is yes:
The American jobs engine hit stall speed in May, with the economy adding just 69,000 new jobs while the unemployment rate climbed to 8.2 percent.
As another summertime swoon looms, the Bureau of Labor Statistics reported that job creation missed economist estimates for 158,000 new positions, and said labor force participation remains near 30-year lows though incrementally better than last month.
The unemployment rate that counts discouraged workers rose as well, swelling to 14.8 percent.
In May, stocks suffered through their worst month in two years, and the job-creation figures only added to the gloom.
Stock market futures indicated a sharply lower open for Wall Street, while investors continued to pour into bonds, sending the 10-year Treasury note yield tumbling to near 1.47 percent.
Getting back to the report, there really wasn’t any sector of the economy that did well last month, although some did far worse than others:
Health care employment continued to increase in May (+33,000). Within the industry, employment in ambulatory health care services, which includes offices of physicians
and outpatient care centers, rose by 23,000 over the month. Over the year, health care employment has risen by 340,000.
Transportation and warehousing added 36,000 jobs over the month. Employment gains in transit and ground passenger transportation (+20,000) and in couriers and messengers (+5,000) followed job losses in those industries in April. Employment in both industries has shown little net change over the year. In May, truck transportation added 7,000 jobs.
Employment in wholesale trade rose by 16,000 over the month. Since reaching an employment low in May 2010, this industry has added 184,000 jobs.
Manufacturing employment continued to trend up in May (+12,000) following a similar change in April (+9,000). Job gains averaged 41,000 per month in the first quarter of this year. In May, employment rose in fabricated metal products (+6,000) and in primary metals (+4,000). Since its most recent low in January 2010, manufacturing employment has increased by 495,000.
Construction employment declined by 28,000 in May, with job losses occurring in specialty trade contractors (-18,000) and in heavy and civil engineering construction (-11,000). Since reaching a low in January 2011, employment in construction has shown little change on net.
Average monthly job growth in the First Quarter of 2012 was a net gain of 226,000 new jobs. So far in the Second Quarter, the average net gain is a paltry 73,000 jobs, meaning that, even if we end up with 150,000 or so jobs created in June, average job growth this quarter, and presumably economic growth itself, is going to be far below what it was at the beginning of the year. As Jared Bernstein notes, none of this bodes well for the economy as a whole, both for the rest of the year and heading into 2013:
As it looks today, the job market is simply not providing workers with the employment and earnings opportunities they need to get ahead. This has obvious negative implications for family budgets, but it also threatens the macro-economy. If this pace of job growth sticks, the economy will slow down from a growth rate that’s already too slow.
So, will it stick? It’s always possible with these monthly reports that some statistical anomalies are in play. A candidate in this case is weather effects, as unseasonably warm weather last winter probably moved job growth that might have occurred in May to earlier months.
If so, that would imply that taking an average of more months of data would give you a more accurate read on the true underlying pace of growth. Over the last six months, net monthly job gains have been 174,000, so a lot depends on whether the current weak trend persists.
However, while one month does not a trend make, three months do. Also, slower job growth is consistent with a number of indicators that slowed in May, along with Europe and fiscal uncertainty regarding the fiscal cliff.
The more immediate concern that many will focus on, of course, will be the impact that these numbers have on the Presidential race. After today, there will only be five more unemployment reports released before Election Day 2012. Quite obviously, another series of dismal jobs reports like we had through the summer months last year would be bad news for the Obama campaign and Democrats in general, and would play right into the Romney campaign’s strategy of arguing that the President has failed to put in place policies that can lead the nation into a recovery that will actually start putting the vast majority of unemployment Americans back to work. Of course, nobody can know where these numbers are going to go over the next five months. Given the relatively sluggish economy and the economic uncertainty sweeping the world right now, it’s probably a safe bet that June’s numbers aren’t going to be much better than what we saw in April or March, and that poses the danger of setting in place a mentality that the economy is indeed slowing down again, causing people to cut back on spending and businesses to cut back on investment. In some sense, then, we’re at a point where thinking that the economy is slowing down will, in essence, become a self-fulfilling prophecy and, if you’re unemployed right now, that’s not good news at all.