Today’s jobs report revealed mixed results that modestly undershot estimates on net, with a shortfall in payrolls, and downward revisions in the April workweek and hours-worked data. We also saw the expected jobless rate drop to 5.8%, and a surprisingly solid 0.5% hourly earnings rise that left a firm 2.0% y/y gain.
For specifics, we saw a 559k nonfarm payroll gain that fell short of estimates after 27k in upward revisions, with only a tiny 3k goods sector rise alongside a restrained 489k service employment gain. We now have prior nonfarm payroll gains of 278k (was 266k) in April and 785k (was 770k) in March.
- We saw a 492k private payroll rise after 17k in upward revisions. Government jobs rose a robust 67k after 10k in upward revisions. We saw a huge 103k rise in state and local education employment that more than accounted for the May government increase.
- The workweek sat at 34.9 for a third consecutive month (was 35.0 in April), following a 34.6 figure in February.
- We assume the workweek will remain in the elevated 34.8-35.0 area until restaurants, hotels, airlines, and entertainment are more fully reopened.
- We saw the expected 0.5% hours-worked rise after a 0.2% (was 0.5%) April gain and a 1.4% March surge, which left a weaker than expected path due to the April revision.
- For the goods sector breakdown, we saw a 23k gain for factories, a surprising -20k drop for construction, and a flat figure for mining. The goods sector revealed a flat hours-worked figure, with a 0.3% gain for factories, but declines of -0.5% for construction, and -0.9% for mining. We saw a 0.2% hours-worked rise for the private service sector.
- The big 0.5% May hourly earnings rise followed a 0.7% April surge but a -0.1% March drop. The y/y hourly earnings rise rebounded to 2.0% from 0.4% (was 0.3%) in April and 4.3% (was 4.2%) in March thanks to gyrating base effects, given an 8.2% y/y peak in April of 2020 that was gradually unwound over the ensuing months.
The household data modestly undershot assumptions just like the establishment data, but with a solid gain for civilian employment that left a drop in the jobless rate.
We saw a 444k May gain for civilian jobs and a -53k drop for the labor force, following respective April gains of 328k and 430k.
The jobless rate fell to a cycle-low 5.8% (5.79%) from 6.1% (6.09%) in April and a prior cycle-low 6.0% (6.05%) in March, versus a 14.77% peak in April of 2020. We saw a 3.55% low from the last cycle in December of 2019 and a 9.98% prior cycle-high in October of 2009.
The labor force participation rate slipped to 61.6% from 61.7% in April and 61.5% in March, versus a 48-year low of 60.2% in April of 2020 that marked the lowest readings since February of 1972.
Today’s jobs data trimmed prospects for the other May reports, and suggest modest downside risk to our GDP growth estimates of 8.5% Q2 GDP growth after a Q1 boost to 6.5% from 6.4%. Our Q2 GDP estimate may need to be revised modestly lower.
