Jobs keep getting added in May, wages up too. But not the blowout that fires inflation

Given that we'd seen evidence of the economy softening in reports over the last month, a lot of people were looking to Friday's jobs report for May to see if there was reason for the concerns to go into full-blown alarm.

But instead, we found out the jobs market was still rolling along.

Key takeaways from the big May jobs report:

The good news
1) +272,000 jobs added. Strong hiring in healthcare and local gov't.
2) Strong wage gains that are well above inflation. +4.1% in past year (and 0.4% in May alone)
3) Prime-age labor force participation highest in 22… pic.twitter.com/1QnIvFNAot

— Heather Long (@byHeatherLong) June 7, 2024

Good signs, generally. We are now more than 6 million jobs above our pre-COVID peak, a remarkable accomplishment given the large amount of Boomers that have aged out of the workforce in the last 4 years, and the fact that, you know...lots of people DIED in that time period.

And leading the way again was hiring in health care, which added another 68,300 jobs in May, and has added nearly 1.6 million jobs since the end of 2021.

It also was nice to see construction rebound from (seasonally-adjusted) flat April to add another 21,000 jobs in the sector in May. Manufacturing also had its 2nd straight month of gains in May (+8,000) and has almost entirely reversed the losses that sector suffered in Feburary and March. However, I'll note that while construction has been steadily adding jobs since the end of 2022 (384,000 since then), manufacturing employment continues to stay near its 2022 levels.

But what's up with the rise in unemployment to 4.0% (OK, 3.96%), and the losses in the labor force, with the number of "employed" falling by 408,000? Former Obama Administration advisor Jason Furman thinks it's not a big deal, and that the payrolls survey is likely more accurate on the overall picture. It also could give a clue as to what is (or is not) the potential for job growth in the economy.

Specifically the fact that the unemployment rate has been gradually rising for a year and a half is indicative of a labor market that is loosening and job growth that is slightly below steady state. pic.twitter.com/zYlQRc2LR2

— Jason Furman (@jasonfurman) June 7, 2024

The payroll survey could also be too high. It is better designed to measure levels but it cannot observe new business formation and destruction. And a direct census of payrolls (QCEW) is running lower.

— Jason Furman (@jasonfurman) June 7, 2024

So I don't think this report is quite the blockbuster that some have made it out to be. But the 0.4% increase in average hourly wages and 0.5% bump-up for non-supervisory workers is welcome recovery from the tepid 0.2% increase in April, and it will likely lead to a real wage increase when we see the CPI numbers come out next week.

It's certainly not a jobs report that you'd see if this was an economy stalling out toward recession, and let's see if a calmer inflation number for May will combine to soothe some worries people may have had as June began.