May’s nonfarm payroll report showed a sub-par gain of 38,000 jobs—a figure that drops to just 25,000 jobs if government hiring is excluded. While the headline figure included the impact of approximately 35,000 striking Verizon workers, the survey incorporated significant negative revisions to March and April headline data as well (-59,000), making for an even weaker report. Adding back the striking workers would have produced a gain of 60,000 workers in the private sector, which would have marked the weakest reading since March 2010. The release suggested deterioration across many industries: employment in construction and manufacturing each contracted, while employment in the professional and business service sector rose by just 10,000 jobs, versus an average of 40,000 and 50,000 for the prior 3-month and 12-month periods, respectively. Weakness in professional and business service hiring, combined with the striking telecommunications workers, led to a contraction of 16,000 office-using jobs (Table 1 and Chart 1 on the following page).
The household survey of employment appeared better on its face, although the decline in the unemployment rate from 5.0% to 4.7% was largely due to a decrease in the labor force (with the labor force participation rate falling by 0.2 percentage points.) Average hourly earnings and average weekly earnings rose by 2.5% and 2.2% year-over-year, respectively—the same rate of increase as in April. Even so, the impact from rising wages will be offset by any slowdown in the pace of hiring. As Chart 2 on the following page highlights, hiring of temporary help workers usually precedes hiring of office workers, the former of which has begun to slow. The increase in temporary help workers over the last year has averaged just 1,400 workers a month, in comparison to an average increase of 10,800 in the prior year. While one month does not make a trend, today’s report may make the Fed more inclined to examine the June payroll report before increasing rates—which suggests that they may pass on a policy move when they meet in less than two weeks from now on June 15.
Table 1. Monthly Change in Office-Using Payrolls by Category (000s, SA)
Chart 1. Office-Using Employment and Total Payrolls, May 2008 – May 2016 (Seasonally-Adjusted, 000s)
Temporary Help and Office-Using Less Temporary Help Payrolls (Seasonally-Adjusted, 000s)