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Job Growth Weakest in a Year; Unemployment Rate Up

The nation added 69,000 jobs in May, far below expectations of 150,000 new jobs and a drop from April’s revised payroll growth of 77,000, the ""Bureau of Labor Statistics"":http://www.bls.gov/ reported Friday. The closely watched unemployment rate inched up to 8.2 percent â€" a function of an increase in the nation’s labor force to the highest level ever.


Economists surveyed by Bloomberg had expected the number of jobs to increase by 150,000 and the unemployment rate to remain at 8.1 percent.

But while the jobs total was certainly disappointing for a President seeking re-election, the White House could find a glimmer in the employment data â€" the result of a survey of 60,000 households â€" which put the number of people employed in May at 142,287,000 â€" the highest level since January 2009 when President Obama took office.

That said, the balance of the report was dismal.

Not only did payroll jobs drop to the lowest level since May 2011, but average weekly hours dropped to 34.4 hours (from 34.5 hours), the lowest level since November and average hourly earnings fell to $19.70 from $19.71 which computes to an overall decline in weekly earnings affecting consumer purchasing power.

Payroll gains for March and April were revised, subtracting 11,000 from the last published numbers for March and 38,000 from the preliminary report for April. At 34.4 hours, the average workweek remained below the level when the recession began in December 2007 (34.6) but above the 34.2 hours when President Obama took office.

While the number of people employed rose, so did the number of people counted as unemployed (meeting the definitional test of out-of-work, available-for-work and looking-for-work). There were according to the BLS, 12,720,000 people unemployed in May, up from 12,500,000 in April, the first increases since February. The average duration of unemployment rose to 39.7 weeks, from 39.1, the first increase since November.

Part of the reason for the increase in both unemployment and the unemployment rate was the number “re-entrants” to the labor force, 3,439,000, the highest since November, suggesting improving confidence in the ability to find a job or perhaps a consequence of Congressional action cutting off unemployment insurance benefits.

A sharp drop in construction jobs â€" 28,000 â€" led payrolls down. The decline in construction payrolls was itself led by a reduction in “heavy and civil engineering construction” â€" essentially infrastructure work and specialty trade contractors, primarily residential workers. Government shed 13,000 jobs â€"evenly split among federal, state and local governments.

Even with the disappointing numbers, the report continued a string of increases in payroll jobs â€" the 20th straight month of job gains but fell woefully short of population growth. In the 20 months, the over-16 population has grown 4.6 million while the number of payroll jobs is up 3.1 million. To keep up with population growth though the economy has to add between 140,000 and 150,000 jobs per month.

The payroll report followed Thursday’s government report on first quarter corporate profits which showed profits were down 53.8 percent from the fourth quarter.

While the unemployment rate increased, the employment-population ratio, unconstrained by technical definitions of unemployment climbed to 58.6 percent. The inverse of the ratio â€" 41.4 percent â€" can be considered the “unemployment rate” for all persons over 16 regardless of whether they are available or looking for work. The ratio was 62.7 percent when the recession began and 60.6 percent when President Obama took office in January 2009.

The formula for the unemployment rate is to divide the number of people officially counted as unemployed (out of work, available for work and looking for work) by the total labor force (employed plus unemployed). If the labor force change is driven by a drop in unemployment, the unemployment rate will decline. In May, the drop was due to a decline in both employment and unemployment.

Within the financial sector, which itself added a net 3,000 jobs in May, the number of credit “intermediation” positions â€" underwriters â€" fell by 3,500 after falling 3,900 in April. The number of real estate jobs was up 2,700 in May, after increasing 1,400 in April.

The number of temporary jobs increased 9,200 in May increasing 12,600 in April. While temporary hiring is considered by some an entry ramp to permanent employment it also suggests a lack of confidence by employers who are reluctant to make a commitment and swallow associated costs of having an employee.

The closely watched alternate measure of unemployment â€" which includes individuals working part time for economic reasons and those “marginally attached” to the labor force â€" rose to 14.8 percent in May. It was 14.5 percent in April, unchanged from March.

The numbers of job-leavers, often an encouraging sign suggesting workers have confidence in their ability to find a new job, dropped in May for the second straight month.

The unemployment rate for the prime home-buying age cohort â€" 25 to 34 â€" rose to 8.2 percent in May â€" from 8.1 percent in April while the unemployment rate for those over 55, generally the prime home-selling age cohort, increased to 6.5 percent in May from 6.3 percent in April.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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