Payrolls grew by 272,000 in May, almost 100,000 above the estimate of 180,000. The private sector contributed 229,000 of this, versus the forecast of 165,000. Revisions to the two prior months were down a combined 15,000. But in stark contrast, the household survey said 408,000 jobs were lost, elaborates Peter Boockvar, editor of The Boock Report.
Joined with the 250,000-person drop in the labor force, this saw the unemployment rate rise by one tenth to 4%, matching the highest since November 2021, though that is historically very low as we know.
The trajectory is what matters here though. The all-in U6 rate held at 7.4%. And the big thing with the household survey is that about ALL of the jobs lost were in the 20-to-24-year age cohort, totaling a fall of 474,000. Those aged 25-54 saw job gains of 87,000 and the 55-and-older crowd saw only a modest drop of 31,000. So, it’s important to look under the hood here.
Average hourly earnings rose 0.4%, one tenth more than consensus and the year-over-year pace was up 4.1%. For perspective, this averaged 2.5% per annum in the 20 years leading up to Covid. Hours worked were as expected at 34.3, which is where this indicator was in February 2020. Combine this with the hourly earnings figure and weekly earnings grew by 0.4% month-over-month and 3.8% YOY.
The participation rate fell two-tenths back down to 62.5%. This was 63.3% in February 2020 because of retiring Boomers, among other factors. On the flip side, the 25-54-year-old age group saw its participation rate rise to 83.6% from 83.5%. That is the highest in 22 years.
There was another rise in those working part time because of ‘slack work’ to the most since October 2021. Those working part time because they can’t find full time fell by 92,000, but only after rising by 135,000 last month to the highest since November 2020.
The birth/death model was a big contributor to job gains, totaling 231,000. This of course is an estimated number and where the greatest amount of potential revisions take place from. That figure is similar to what was seen in the past few years.
Bottom line, the BLS (while subject to many rounds of revisions) continues to be the outlier in terms of reflecting robust job growth and they did it again, especially relative to ADP. Smoothing out the noise puts the three-month PRIVATE SECTOR average at 206,000 versus the six-month average of 202,000 and the 12-month average at 178,000. That compares with ADP at 184,000 for three months, 166,000 for six months, and 194,000 for 12 months.
Over time, these measures converge and the beauty of ADP is that they have payroll slips in hand while the BLS has to do a lot of estimating with its initial print. If the Fed continues to look for reason to cut, they didn’t find one Friday, notwithstanding the rise in the unemployment rate.
