Robert Hughes

What Does the Weak May Jobs Report Mean?

The Employment Situation report from the Bureau of Labor Statistics, known as the jobs report, was weaker than expected for May. Nonfarm payrolls added just 138,000 new jobs for the month, below the consensus expectations of 178,000. Excluding the loss of 9,000 workers from government payrolls, the private sector added just 147,000 for May. That is well below the average of 179,000 new jobs added per month over the past year. The slowdown in job creation was widespread across most industries.

There are two competing theories on the cause of the slowdown: the United States is running out of workers, or the economy is slowing down. Those two explanations have dramatically different implications for the economic outlook.

Labor-Market Signs Stay Strong Ahead of the BLS Jobs Report

The ADP National Employment Report shows U.S. businesses added 253,000 workers in May. That result follows a revised 174,000 gain in April and makes May the sixth month in the past seven when private payrolls increased by more than 200,000. The ADP figures may not match the data from the national employment report from the Bureau of Labor Statistics each month (due out Friday, June 2), but the trends tend to be similar.

The Broad Economy Showed Strength in April Though Housing Weakened

The Chicago Fed’s National Activity Index, a weighted average of 85 economic indicators, rose to 0.49 in April following a 0.07 reading in March. For this index, zero represents trend growth in the economy with positive numbers suggesting above-trend growth and negative numbers implying below-trend growth. Using a six-month moving average to smooth out the monthly volatility, the index registered 0.14 in April, the highest since December 2014 and well above the −0.24 result in May and August 2016.

Broad Gains in Industrial Production Strengthen a Positive Outlook

Industrial production jumped 1.0 percent in April, the largest monthly gain since February 2014. Over the past year, industrial production is up 2.2 percent, the best growth since the year ending in January 2015. Those gains helped push capacity utilization up 0.6 percentage points to 76.7, the highest since August 2015.

Labor Market Continues to Tighten

Low levels of initial claims, a high number of open positions, and rising numbers of workers quitting jobs for new ones all point to a tight labor market.

April Jobs Report Preview

The monthly jobs report may be the single most important data release for judging the health of the labor market. Last month, the Bureau of Labor Statistics reported the U.S. economy added just 98,000 jobs in March, well below the recent trend of about 200,000 new jobs per month.