U.S. Job Growth Stalls in May, While the Unemployment Rate Reaches a 16-Year Low
- The U.S. economy added 138,000 nonfarm jobs in May according to the Bureau of Labor Statistics, well below the expected 180,000. April and March numbers were also revised down. While monthly jobs changes have varied greatly over the past few months, May’s numbers are the year’s second lowest. In May 2016, job additions also dropped to the lowest level of the year but were followed by the strongest employment month of the year in June. Job growth has averaged 162,000 in the first five months of 2017 compared with the 157,000 jobs added during the same period last year.
- The lack of qualified laborers seems to be playing a critical role in slower job growth. A Bureau of Labor Statistics report released in May showed that there were 5.7 million job openings, which still hovers near the highest level in this cycle, set in June of last year.
- The national unemployment rate fell to 4.3 percent, mostly due to a lower participation rate, which declined again to 62.7 percent. The rate is still above the cyclical low of 62.5 percent seen in October 2015. Participation for those ages 25 to 54 is still edging higher and stands at 81.7 percent. The highest participation rate for this age group was recorded in the early 2000s at about 84 percent to 85 percent.
- Wage growth was weak due to downward revisions from April and May and has not budged above 2.5 percent year over year.
- Strong hiring continued in the service sector, with solid gains in the business services, education and health, and leisure and hospitality industries. The retail sector is struggling with structural changes. Manufacturing shed more jobs than usual, though last month’s numbers were revised up. Construction hiring remains solid.
- While the information sector lost a few jobs, the IT sector is up 39,500 jobs year over year, according to a CompTIA analysis. Larger losses were seen in IT occupations in all other industries, though May’s losses follow strong April gains. As in many others sectors, IT job numbers have fluctuated greatly from month to month, so placing too much emphasis on a single month’s numbers may not paint an accurate picture. Demand remains strong for software developers and computer-system engineers.
- Taken together, today’s jobs report highlights some underlying demographic trends. With baby boomers retiring and millennials entering the workforce, tight labor conditions are still not translating into stronger wage growth, which is the most challenging economic indicator. Job growth is forecast to remain solid despite May’s lower-than-expected numbers, and most economists project that the U.S. gross domestic product will pick up in coming quarters.
Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.