| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Nonfarm Payrolls - M/M | 182,000 | 150,000 to 225,000 | 272,000 | 175,000 | 165,000 |
| Unemployment Rate | 3.9% | 3.8% to 3.9% | 4.0% | 3.9% | |
| Private Payrolls - M/M | 168,000 | 132,000 to 200,000 | 229,000 | 167,000 | 158,000 |
| Manufacturing Payrolls - M/M | 5,000 | 3,000 to 7,000 | 8,000 | 8,000 | 6,000 |
| Participation Rate | 62.7% | 62.7% to 62.7% | 62.5% | 62.7% | |
| Average Hourly Earnings - M/M | 0.3% | 0.2% to 0.3% | 0.4% | 0.2% | |
| Average Hourly Earnings - Y/Y | 3.9% | 3.8% to 3.9% | 4.1% | 3.9% | 4.0% |
| Average Workweek | 34.3hrs | 34.3hrs to 34.4hrs | 34.3hrs | 34.3hrs |
Highlights
Nonfarm payrolls are up 272,000 in May after a net downward revision of 15,000 in the prior two months. The consensus in the Econoday survey is for payrolls to rise 182,000 in May. The above-expectations change in payrolls points to ongoing strength in hiring. The unemployment rate is up a tenth to 4.0 percent in May, a little above the consensus of 3.9 percent in the Econoday survey. The rate reflects a 408,000 decrease in the number of persons employed to 161.083 million, while the number of unemployed increase 157,000 to 6.649 million. Overall, these suggest that conditions in the labor market remain solid and provide little reason for the FOMC to change their outlook regarding the maximum employment side of the dual mandate while keeping monetary policy restrictive to fight inflation.
The pace of hiring for the second quarter to-date is averaging 219,000 per month compared to 267,000 in the first quarter, but is more in line with the up 216,000 and 212,000 for the third and fourth quarters 2023, respectively.
Private payrolls are up 229,000 in May from April. Payrolls among goods-producers are up 25,000, mainly on an increase of 21,000 for construction, while manufacturing is up 8,000 and mining and logging down 4,000. Service-providers' payrolls are up 204,000 on broad-based gains. The largest increases are 86,000 for private education and healthcare, 42,000 for leisure and hospitality, and 33,000 for professional and business services.
Average hourly earnings are up 0.4 percent in May from April, and up 4.1 percent from May 2023. The underlying pace of wage increases has moderated since the start of the year, but remain above pre-pandemic levels due to competition for workers with the right skills and experience. The average workweek is unchanged at 34.3 hours in May.
If the unemployment rate is its highest since 4.0 percent in January 2022, the U6 unemployment rate the broadest measure of unemployment is unchanged at 7.4 percent in May from April, and is the highest since 7.7 percent in November 2021.
The labor force participation rate is down two-tenths to 62.5 percent in April and back to where it was in January. A decrease of 250,000 in the labor force in May means fewer workers.
The pace of hiring for the second quarter to-date is averaging 219,000 per month compared to 267,000 in the first quarter, but is more in line with the up 216,000 and 212,000 for the third and fourth quarters 2023, respectively.
Private payrolls are up 229,000 in May from April. Payrolls among goods-producers are up 25,000, mainly on an increase of 21,000 for construction, while manufacturing is up 8,000 and mining and logging down 4,000. Service-providers' payrolls are up 204,000 on broad-based gains. The largest increases are 86,000 for private education and healthcare, 42,000 for leisure and hospitality, and 33,000 for professional and business services.
Average hourly earnings are up 0.4 percent in May from April, and up 4.1 percent from May 2023. The underlying pace of wage increases has moderated since the start of the year, but remain above pre-pandemic levels due to competition for workers with the right skills and experience. The average workweek is unchanged at 34.3 hours in May.
If the unemployment rate is its highest since 4.0 percent in January 2022, the U6 unemployment rate the broadest measure of unemployment is unchanged at 7.4 percent in May from April, and is the highest since 7.7 percent in November 2021.
The labor force participation rate is down two-tenths to 62.5 percent in April and back to where it was in January. A decrease of 250,000 in the labor force in May means fewer workers.
Market Consensus Before Announcement
A 182,000 rise is the call for nonfarm payroll growth in May versus a lower-than-expected 175,000 in April. Average hourly earnings in May are expected to rise 0.3 percent on the month for a year-over-year rate of 3.9 percent; these would compare with April's rates of 0.2 and 3.9 percent, which were also lower than expected. May's unemployment rate is expected to hold unchanged at April's 3.9 percent which was less tight than expected.
Definition
The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Description
If ever there was an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions can be dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
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.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
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.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
