May jobs hit the brakes, is the economy gonna do the same?

The report from the Bureau of Labor Statistics indicates the weakness was across many sectors, with a notable exception being health care, which added 46,000 jobs last month and has added nearly half a million jobs in the last year. Especially concerning is the fact that mining and manufacturing continue to lose jobs, something that has become a common theme in the last year.

In May, mining employment continued to decline (-10,000). Since reaching a peak in September 2014, mining has lost 207,000 jobs. Support activities for mining accounted for three-fourths of the jobs lost during this period, including 6,000 in May…

Within manufacturing, employment in durable goods declined by 18,000 in May, with job losses of 7,000 in machinery and 3,000 in furniture and related products.

Employment in professional and business services changed little in May (+10,000), after increasing by 55,000 in April. Within the industry, professional and technical services added 26,000 jobs in May, in line with average monthly gains over the prior 12 months. Employment in temporary help services was little changed over the month (-21,000) but is down by 64,000 thus far this year. Employment in other major industries, including construction, wholesale trade, retail trade, transportation and warehousing, financial activities, leisure and hospitality, and government, changed little over the month.

The flip side of the report is also very odd, as unemployment dropped to its lowest level since November 2007, at 4.7%. And the main culprit behind the drop wasn’t more people working, but a seasonally-adjusted 458,000 people dropping out of the work force in May, and over 800,000 people in the last 2 months. Some of this seems to be “regression to the norm”, as the BLS has also said that 2.4 million were added to the work force between September 2015 and March 2016, so the net change in 8 months is still +1.6 million.

The unemployment rate story in particular is why I’m thinking some of the weirdness in this report has to be related to seasonal adjustments. Take a look at the difference between seasonally-adjusted numbers and the non-seasonal ones for the last 2 months.

Change in private-sector jobs, April + May 2016
April 2016 seasonally adjust. +130,000
April 2016 non-seasonal adjust. +1.027,000

May 2016 seasonally adjust. +25,000
May 2016 non-seasonal adjust. +697,000

TOTAL CHANGE
Seasonally- adjust. +155,000
Non-seasonal adjust. +1,724,000

Change in labor force, April + May 2016
April 2016 seasonally adjust. -362,000
April 2016 non-seasonal adjust. -366,000

May 2016 seasonally adjust. -458,000
May 2016 non-seasonal adjust. +312,000

TOTAL CHANGE
Seasonally- adjust. -820,000
Non-seasonal adjust. -54,000

Don't take that last part to mean I don’t think there isn’t cause for concern with job growth in America- past Aprils and Mays also had these types of seasonal deflators, and the seasonally-adjusted numbers were still fine. The last 3 months of March, April, and May 2016 have had average job growth of just over 107,000 private-sector jobs, while the previous 12 months before that had job growth of nearly 220,000 a month. If job growth is getting cut in half, that needs to return to the higher trend fast, or else we may really be sliding into the end of the Obama Jobs Recovery that’s been running for over 6 years.

Let’s keep an eye on things in the near future to see if other indicators are heading downward as well (oddly, most April indicators showed a bounce back from the sub- 1% growth we had at the start of 2016). We also will see if the students that are getting out of class are finding work, or if they add to the below-trend seasonal amounts in the June report. Seems like a big key going forward