Editor's Note: This report is based on survey data from May 2023 that was published in June 2023. This is the most recent data available. (Source: Bureau of Labor Statistics)
Not only did US employers add nearly 340 thousand new jobs last month, but March and April’s numbers received an upward revision as well, by 41 thousand and 52 thousand, respectively.
Although new job additions are still below the uncharacteristically strong job growth seen in January and February of this year, the trend over the last 3 months from March through May is becoming increasingly positive.
Despite the impressive number of new hires, however, the average unemployment rate across the US went up by three-tenths of a point to 3.7%, which is the highest unemployment rate registered since November 2022.
Granted, since it was at a half-century low last month, up was always the most likely direction for the unemployment rate to go, but three-tenths of a point is a relatively large jump. In fact, there hasn’t been a month-to-month change of three-tenths of a percentage point in the US unemployment rate since December of 2021 when the rate fell to 3.9% from 4.2% the month before.
There was also a significant month-to-month increase in the number of job losers and those whose temporary employment contract expired last month, which grew by almost 320 thousand people during May, increasing from 2.64 to 2.96 million which is essentially on par with March’s data.
For the second month in a row, the industry that saw the largest number of new jobs was professional and business services, which added 64 thousand jobs last month, followed by government and health care, which each added a little more than 50 thousand jobs.
Prior to the recent ascendance of professional and business services, the leisure and hospitality industry led the hiring charge for most of the past two years as it lagged behind most industries in terms of recouping pandemic losses. Last month, leisure and hospitality added another 48 thousand jobs, which is on par with the 40 thousand and 47 thousand jobs added each of the past two months prior, though below the average of 77 thousand new jobs that leisure and hospitality businesses had been adding each of the past 12 months. It appears that rehiring in the leisure and hospitality industry is slowing down as it approaches February of 2020 staffing levels, which are still about 2.1% or 350 thousand more job additions away.
The construction, social assistance, and transportation and warehousing industries each added about 25 thousand jobs, as well, while payroll ranks were largely stable in the oil and gas extraction, mining, manufacturing, wholesale, retail, and financial services industries.
Average hourly pay for all employees rose by 11 cents to $33.44 per hour, which is a 4.3% increase over the past 12 months. Pay for private-sector non-supervisory roles climbed at a somewhat steeper rate, adding 13 cents to average hourly pay last month and landing on $28.75 per hour.
The average work week for all employees decreased by 6 minutes to 34 hours and 18 minutes per week, while the workweek for non-supervisory employees held steady at 33.8 hours.
The 339 thousand new jobs added last month is right on point with the average monthly job additions for the past 12 months of 341 thousand, which is all the more remarkable considering the Fed has raised the interest rate by almost 5 points during that time with the specific intent of cooling off the job market as an anti-inflationary tactic.
Despite the impressive hiring numbers, of course, the unemployment rate did climb significantly in the same report, which seems to reveal some degree of disconnect or dissonance in the data. It’s always a worthwhile reminder that the information used to assess the unemployment rate and the job additions are entirely separate data sets, so divergence is not unexpected or especially unusual.
It’s also worth noting that the current unemployment rate at 3.7% is still historically low despite rising by three-tenths of a point last month - it’s just not as historically low as it was last month when it matched its lowest level since the 1960s.
Still, there are other indicators that the economy may in fact be softening more than the jobs numbers and unemployment rate alone would indicate, including sales numbers for existing homes that are down 3.4% from last month and down more than 23% from April of 2022.
The Fed will once again reconvene later this month to determine if it will increase interest rates for the 11th time since March of 2022. Many prognosticators had interpreted statements by Fed Chairman Jerome Powell to indicate that a pause in rate hikes was a likely outcome of the upcoming meeting, but the continued strong performance of the job market may be calling some of those forecasts into question.
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