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Here’s the ‘bad news’ in the ‘good’ jobs report
CNN –
At a time when Americans and the Federal Reserve are clamoring for clear data on the state of the economy, Friday’s jobs report it was much more opaque than anyone expected.
While “it’s hard not to like a lot of jobs,” as economist Dean Baker told CNN, other content in the May jobs report adds to the pile of unwelcome economic news that includeslower GDP growth, a setback in some expenses It is increase in credit card defaults.
“The good news is that we have seen an explosion in payrolls. The bad news is rising unemployment with an acceleration in wage gains,” Diane Swonk, chief economist at KPMG, told CNN.
The unemployment rate rose from 3.9% to 4%. It is the first time in more than two years that the unemployment rate has not fallen below 4%.
The increase in unemployment can be attributed to the findings of the household survey (one of two surveys that contribute to the monthly employment report). Compared to the establishment survey that showed the robust net gain of 272,000 jobs, the household survey faltered.
Employment, as measured by responses to household surveys, fell by 408,000 in May compared to April; the number of people in the labor force fell by 250,000; the labor force participation rate fell from 62.7% to 62.5%, PNC chief economist Gus Faucher noted Friday.
“Jobs declined in the household survey, but that number is more volatile than the employer survey,” he wrote.
And although unemployment increased only slightly, by 0.1 percentage points, it reached a number that may have a psychological component.
“4% is considered a magic number – a number below which participation increases, below which we tend to see employment rates increase faster for women and minorities,” said Julia Pollak, chief economist at ZipRecruiter, to CNN earlier this week.
“Employers in a tight labor market have to do extraordinary things; they have to cast a wider net; they must actively recruit non-traditional candidates; They have to offer more attractive working conditions, more flexibility, think about installing air conditioning in trucks or offering buses to employees. So it’s kind of a magic number,” Pollak said.
Stronger-than-expected wage gains this month increased average hourly earnings to 4.1% last year, reversing a cooling trend that had been ongoing for months.
“The Fed does not directly target wages; but where the collected wages are in [service sector] areas where we saw more inflation,” Swonk said.
This is in the service sector, from personal care services, dry cleaning, home cleaning and maintenance, and vehicle maintenance, she said.
“And that’s a difficult thing for the Fed to do, because for some of the increases that we’re seeing in the services sector, we need to see offsets in the prices of goods in order to reduce inflation,” she said. “But it takes a lot of this on a consistent basis to deal with the stickier inflation we are seeing in the services sector; and, unfortunately, wages matter more in specific areas where inflation has become stickier.”
A report released Thursday showed that fewer job cuts were announced in May than in the previous month and year. That’s actually good news for Americans and those concerned about the recession, but the same report also noted that hiring ads have also dropped.
Through May of this year, U.S.-based employers announced plans to hire 50,833 workers, marking the lowest total for the first five months of the year since 2014, according to data from Challenger, Gray & Christmas released Thursday.
“Typical turnover in a healthy job market appears to be stagnant,” said Andrew Challenger, senior vice president at the outplacement and business research firm, in a statement.
Although hiring has slowed and job openings have decreased, the number of layoffs remains low. Weekly jobless claims remain below pre-pandemic levels, and Challenger’s own report shows a 20% drop in job cut announcements compared to May 2023.
“There are ample signs that the heat in the labor market of recent years has largely been wiped out,” Wells Fargo economists Sarah House and Mike Pugliese wrote Friday.
Last week’s Gross Domestic Product report, which measures all services and goods produced in the economy, showed an annualized rate of 1.3%. This is below 1.6% reflected in the first estimate.
The slower pace of economic expansion was largely due to a downward revision in consumer spending, which represents about 70% of the US economy. Spending advanced 2% in the period from January to March, compared to the initial rate of 2.5%.
The latest GDP report also showed that pre-tax corporate profits fell 0.6% in the first quarter, the first fall in a year and a sharp drop from the 4.1% rise in the previous three-month period. . Still, while most corporate earnings results this quarter were decent, companies indicated that it has become increasingly difficult for them to pass on costs to consumers.