The labor market slowed dramatically in May 2016, with employers adding only 38,000 jobs, according to the latest report by the Bureau of Labor Statistics (BLS). This is considerably lower than economist predictions of almost 162,000 jobs.
The rare bright spot was healthcare, which added 46,000 jobs. Professional and business services added 10,000 jobs in May 2016, after adding 55,000 jobs in the previous month. Meanwhile, mining shed 10,000 jobs and manufacturing lost 18,000 jobs. Information declined by 34,000 jobs, largely due to the Verizon strike.
“Boy, this is ugly. The losses were deeper and more broad-based that we expected, and with the downward revision to previous months, it puts the Fed back on pause. …The only good news is that wages held.” ~Diane Swonk, an independent economist in Chicago.
Average hourly earnings for private-sector employees increased by 5 cents to $25.59, after increasing 9 cents in April 2016. Average hourly earnings have increased 2.5 percent so far in 2016.
The unemployment rate, however, fell from 5 percent to 4.7 percent, the lowest since November 2007. However, economists believe that this is not due to better employment but because nearly 500,000 Americans have stopped working or looking for jobs. The labor force participation rate declined 0.2 percent to 62.6 percent, while the number of workers employed part-time for economic reasons increased to 6.4 million.
Jobs Added/Lost and Unemployment Rate
The Decline in Temporary Employment
The most recent jobs report released by the BLS, revealing that the U.S. economy has created the fewest jobs in over five years, also indicated that temporary employment has also been declining. This trend is typically a leading indicator for declines in overall employment. For example, ahead of the Great Recession, temporary staffing jobs began declining on a consistent basis in the spring of 2007, roughly a year before overall employment began to plunge.
In the first five months of 2016, U.S. employers lost about 64,000 temporary jobs, the biggest decline since August 2009.
In May 2016, the number of temporary jobs fell by 21,000.
“Last quarter, we saw the slowdown at the commercial staffing companies. That’s usually the first sector that sees this kind of slow down. I don’t want to pull the fire alarm here, but those numbers indicate that we’re not moving in the right direction.” ~Jeff Silber, Analyst at BMO Capital Markets
Does the Quits Rate Indicate a Weak Job Market?
Data from the Job Openings and Labor Turnover Survey (JOLTS) indicates a continuing weakness in the labor market, despite the relatively low unemployment rate. While the unemployment rate has averaged 4.95 percent in Q1-2016, other measures from the labor market indicate weakness.
When workers feel that there are fewer job opportunities available, they are less likely to quit their job. Through the first quarter of the year, the quits rate has averaged only 2.04 percent, an unusually low rate.
By examining past data, a clearer picture is portrayed. Looking at the quits rates for prior periods where the unemployment rate has been 4.95 percent (same as current), shows that this level of unemployment is ordinarily associated with a considerably higher quit rate.
Quit Rate in Periods of 4.9% to 5.0% Unemployment
America’s Record Number of Job Openings
According to the Labor Department data, there were 5.78 million job openings. This matches the all-time high set in July 2015. The openings were found across a range of industries, with manufacturing and trade and transportation each posting upwards of 46,000 jobs.
This data could represent both good and bad news. On one hand, it means employers are hiring more; during the worst part of the recession in 2009, there were only 2.3 million job openings. But on the other hand, it could indicate a symptom of a growing problem in the U.S. economy, where employers are unable to find skilled workers for the jobs they need.
Meanwhile the decline of job postings for professionals on LinkedIn has labor experts predicting that businesses are slashing their recruiting efforts in higher-paying professional categories. Online job postings on LinkedIn have plunged since February 2016, with May 2016 being portrayed as one of the worst months since January 2009.
According to job market experts, this could be another sign that the labor market, along with the overall U.S. economy, has taken a major hit, and that businesses have started to respond to falling sales (down since mid-2014), declining profits (down since early 2015), and lower productivity (weak since Q1-2016), and are looking at their workforce for savings.