By Gregg Giboney The latest read on jobs growth brought good news. Leading the way was non-farm payroll growth of 280,000 in May, which exceeded expectations of 225,000. More importantly, the strong number contradicts much of the soft economic developments that have characterized the first half of this year. Leading areas of job growth for the month included professional and business services (+63k), leisure and hospitality (+57k), health care (+47k), retail (+31k), and construction (+17k).
Lower for the 5th straight month was mining and logging (-17k) which includes energy jobs affected by lower oil prices. The economic weakness this year has been often associated with inclement weather on the east coast and dock strikes on the west coast. The unemployment rate, actually ticked higher to 5.5% in May. The quirky nature of this number was affected by the fact that 400k more people entered the workforce which is nice to hear.
On the other hand, the May labor force participation rate of 62.9% remains near historic lows and consistent with a range of 62.7% to 62.9% range experienced over the past year. An unemployment rate that includes discouraged and underemployed workers remained at 10.8%. Other important indicators were mixed with average workweek hours unchanged at 34.5 hours and annual wage growth of 2.3% that remained below the 3% level that most feel is best for the overall economy. Overall and on its own, this morning’s employment report was not robust in and of itself. When compared to recent economic developments, however, it was certainly good news especially when considering the economy actually contracted during the first three months (GDP down 0.7%).
A key implication from this report is that it provides room for the US Federal Reserve Fed to raise short-term rates sometime soon.