The United States Employment Situation was released this morning and the glimmer of hope that I had been nurturing as the February, March, and April data came out has been weakened. While the May public sector jobs result was like I forecasted, the private sector jobs result was much weaker.
Non-farm jobs increased 54 thousand over April, consisting of a gain of 83 thousand in the private sector (I forecasted 240 thousand), and a 29 thousand job loss in the public sector (I forecasted a loss of 18 thousand).
What sectors drove the the slowdown? There was a 30 thousand job slowdown in manufacturing jobs, a 70 thousand slowdown in retail jobs, a 40 thousand job slowdown in leisure and hospitality, and a 20 thousand job slowdown in education and healthcare.
The decline in Retail is interesting. The sector is experiencing a secularly growing share of online sales, which overall, will reduce the demand for workers. Also, there are technology adoptions that have yet to fully play-out. For example, self-check stations are now at major grocery stores, but they are probably not yet responsible for half the check-out volume. But, we can expect they will eventually be responsible for much more than half the check-out volume. Another thing that I worry about is that consumption growth is now under trend and could stay that way due to high consumer debt levels. These, and relatively high unemployment levels, could imply weak Retail job growth in the near term.
The other part of this jobs report contains results from the household survey, which indicates changes in labor force and unemployment. The labor force jumped substantially in May, by 272 thousand people. This was only slightly offset by a rise in 100 thousand people reporting themselves as employed. As a result, the unemployment rate rose from 9.0 to 9.1 percent, much different than my forecast of a fall in the unemployment rate.
This month’s Employment Situation highlights the fragility of the economy. Manufacturing has been one of the few bright spots in the economy since the Great Recession. If a global slowdown is taking hold as some are predicting, this will have a cooling impact on manufacturing jobs and the economy that will last beyond May.