The employment situation is a set of labor market indicators. The unemployment rate measures the number of unemployed as a percentage of the labor force. Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls. (Bureau of Labor Statistics, U.S. Department of Labor) Why Investors Care
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Highlights
Employment strengthened in May but March and April saw downward revisions. Nonfarm payroll employment posted a 157,000 gain in April, following a revised 80,000 increase in April and a 175,000 rise in March. May's payroll gain was above the consensus forecast for a 135,000 boost in payroll jobs. April's payroll increase was revised down 8,000 from the initial 88,000 advance and March was revised down 2,000 from the previous estimate of a 177,000 increase. For April and March combined, the net revision was down 10,000.
Nonfarm payroll employment on a year-on-year basis was unchanged at up 1.4 percent in May.
Within the payroll survey, strength was in service-providing industries - manufacturing jobs fell while construction was flat. Manufacturing fell 19,000, following a 20,000 drop in April. Natural resources & mining was flat. Overall service-providing industries rose 176,000 in May, following a 110,000 boost in April. Gains were led by professional & business services, up 32,000 and government, up 22,000.
Average hourly earnings rose 0.3 percent in May, following a 0.2 percent gain in April. The consensus had projected a 0.3 percent increase in wages for May. Average hourly earnings edged up to up 3.8 percent on a year-on-year basis in May from up 3.7 percent in April. The average workweek in May rose to 33.9 hours from 33.8 hours in April. The market consensus had expected no change from April's initial estimate of 33.8 hours.
Aggregate hours in manufacturing declined 0.3 percent in May - the same as in April - suggesting a weak industrial production number for May.
Turning to the household survey, the civilian unemployment rate was unchanged at 4.5 percent in May - matching the consensus expectation. Household employment rebounded 157,000 in May, following a 468,000 drop in April. The labor force rebounded 175,000 in May, while the number of unemployed edged up 18,000.
Overall, today's employment report shows a rebound in growth in employment but moderation continuing in wages. Some of the strength in this report is offset by a generally weak personal income report. Overall, the economy remains on a moderate growth path.
Nonfarm payroll employment slowed sharply in April with a modest 88,000 gain, following a 177,000 boost in March. With initial unemployment claims running on the low side, forecasters are expecting job growth to pick up in May. On the inflation front, average hourly earnings rose 0.2 percent in April, following a 0.3 percent boost in March. The civilian unemployment rate edged up 0.1 percentage points but remained low at 4.5 percent - just above the cycle low of 4.4 percent.
Nonfarm payrolls Consensus Forecast for May 07: +135,000
Range: +45,000 to +175,000
Unemployment rate Consensus Forecast for May 07: 4.5 percent
Range: 4.4 to 4.6 percent
Average workweek Consensus Forecast for May 07: 33.8 hours
Range: 33.8 to 33.9 hours
Average hourly earnings Consensus Forecast for May 07: +0.3 percent
Range: +0.2 to +0.4 percent
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During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month. |
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The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy. |
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