May unemployment rate surprised and declined to 6.0 percent, down from April's revised rate of 6.1 percent. The seasonally adjusted labour force participation rate was unchanged at 64.7 percent in May 2015 from a revised April estimate.
The number of people employed increased by a surprising 42,000 to 11,759,600. Expectations were for an increase of 13,500. The increase in employment was driven by increases in part time employment for females (up 29,800) and full time employment for males (up 15,900).
The seasonally adjusted number of people unemployed decreased by 22,000 to 745,200. This was driven by unemployed people who looked for full time work, which decreased by 23,500 to 514,500. The seasonally adjusted underemployment rate was 8.5 percent, unchanged from February 2015. Combined with the unemployment rate of 6.0 percent, the latest seasonally adjusted estimate of total labour force underutilization was 14.5 percent, a decrease of 0.4 percentage points from February 2015.
The Labour Force Survey is a key economic indicator giving an overall picture of employment and unemployment. Employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The unemployment rate measures the number of unemployed as a percentage of the labor force.
This report is used as an indicator of the health of the domestic economy. Employment trends highlight the strength in job creation and the implications for future sectoral activity. The unemployment rate is used as an indicator of tightness in labor markets and can foreshadow a future increase in wages. Labor force data provide investors with the earliest signs of industry performance. While other data are produced with a month or two delay, these data are available only a week to 10 days after the end of the latest month. Reactions can be dramatic - especially when the result is unanticipated.
The information in the report is invaluable for investors. By looking at employment trends in the various sectors, investors can take more strategic control of their portfolio. If employment in certain industries is growing, there could be investment opportunities in the firms within that industry.
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.