May Jobs Report Proffers a Needed Reality Check

The latest employment numbers, released on Friday by the Bureau of Labor Statistics, reinforce a key point I made in my assessment of April’s data (see the April jobs analysis) when it was released last month: while many market participants have taken the slow improvement in labor market outcomes as a precursor of an absorption rebound, confidence intervals on fundamentals forecasts should remain wider than prevailing investment trends suggest. In leading markets around the country, investment and credit inflows anticipate that employment momentum will definitely accelerate even as an analysis of the underlying economic data calls for a more reserved assessment.

Apart from the aggregate statistic’s falling short of market expectations, there were few major surprises in the report of May employment. Federal and state government payrolls were largely stable while local governments gave up 28,000 jobs. The private sector added 83,000 jobs, the smallest number in almost a year, since June 2010. As for the ranks of the unemployed, too large a share – 45.1 percent – has been out of work for six months or more.  At 4.5 percent, the unemployment rate is holding at relatively low levels for persons with college degrees. For low-skill labor, such as those persons with less than a high school diploma, the unemployment rate is 14.7 percent.