Saturday, June 2, 2012

May jobs report: Only 69K new jobs. New Normal.

The new normal: 69,000 net new jobs; Black rate up to 13.6%. National rate increased to 8.2%

Jobs report shows 69,000 net new jobs created in May. This is statistically near the new standard rate of 100,000 but below the 12 month average of 150,000. Economists and commentators said the low figure was due to low demand domestically and internationally.

On June 1st, 2012, the BLS announced the US economy created only 69,000 net new jobs in May. The jobs number is a large drop from the 12 month average of 150,000 since June 2011. We also got negative revisions of the March and April jobs reports. March was reduced by -11,000 to 142,000 new jobs and April was reduced by -38,000 to 77,000 new positions. The slow jobs growth is linked to weak demand both domestically and internationally. The US GDP growth rate was reported at 1.9% on May 31st, 2012.

The BLS Jobs report has become the one economic statistic everyone watches. The press headline coverage was "poor" with some reports calling the report "dismal","gloomy" and a "train wreck". However, coverage of the details was quite good. The Romney immediately attacked the president on jobs. He called the report “devastating.” However he appeared a little overzealous and gleeful at the bad news. The administration called for additional stimulus from congress. A more likely scenario is stimulus activity by the Federal Reserve.

Economists had expecting 100K to 150K new jobs, however the actual number can vary by plus or minus 100,000 jobs. The Dow Jones equity index lost about 274 index points on the announcement but recovered early next week based on expected Fed intervention.

As always, employment figures must be considered over several months. Some of the changes are due to random statistical variation. The average work week declined by 0.1 hours to 34.4 and average hourly wages were stagnant at $23.41. (I don’t even know why I bother to write stagnant, wages adjusted for inflation, have not changed in more than 30 years. See chart below).

Average Weekly Earning from Jan 1979 to May 2012

There was a little good news in the report: the household survey said the number of people who self reported they were working increased by 422,000. An additional 622,000 people came back into the labor market which pushed the unemployment rate up.
The national labor force participation rate increased 0.2% to 63.8%.

Black Unemployment

The black unemployment rate rose to 13.6%. The black labor force participation rate was 61.3 (68.1% for black men over 20 and 62.1% for black women over 20). The black teenage unemployment was reported at 36%. The white unemployment rate stayed at 7.4% and the Hispanic rate jumped up to 11.0%.

Employment Stats

The long-term unemployed (27 weeks or more) rose to 5.4 million people which represents 43% of the unemployed. The “work part-time, wants full-time” number was 8.1 million. These people are considered underemployed. The same monthly number of people: 2.4 million were marginally attached to the labor pool. They want work but have not looked in over four weeks. And there were 830K discouraged workers (part of marginally attached) who are not looking because they believe there is no job for them.

Non-Farm Payrolls

As stated earlier, only 69,000 jobs were added to the US economy in May. The private sector added 82,000 jobs (vs. adjusted 77,000 last month) and government employment dropped again by -13K. Job growth was concentrated in durable goods manufacturing, trade and transportation and healthcare. The losers were construction (-28K).

Now let’s look at some of the key areas of the economy. Manufacturing added 12,000 spots; Construction lost -28,000 jobs; Business services was flat at -1K jobs and healthcare added 46,000 new positions.

Average work week shrank 0.1 hours to 34.4 hours and wages added 2 cent in May.

ADP reported an increase in private payrolls of 133,000 positions.

Monster Employment Index moved up to 147 in May from 146 in April. Hiring was up 1% compared to same month last year.

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