According to the Bureau of Labor Statistics, May was a month of solid labor growth.
The payroll survey found employers added 280,000 net new jobs, and the household survey found large numbers of Americans entering the labor force.
Average wages also rose substantially. Over the past year average earnings have risen almost twice as fast as inflation.
The positive employment report makes it more likely the first quarter economic contraction was a statistical anomaly, not a start to an economic slowdown. The Bureau of Labor Statistics payroll survey reported job growth across many industries, with the fastest job growth in the professional and business services (+63,000 jobs), leisure and hospitality (+57,000) and health care (+46,000) sectors. Retail trade (+31,000), government (+18,000), and construction (+17,000) also posted gains.
The drop in energy prices and energy exploration caused the mining sector to shed 18,000 jobs. These figures probably understate mining job losses. Many employed in the energy sector work as independent contractors and do not appear in the payroll survey.
Further encouraging news came in hourly wage growth. Average hourly earnings rose 8 cents to $24.96. Wages have grown 2.3 percent over the year, almost twice the rate of inflation. Over the past three months wage growth has averaged 2.9 percent (on an annualized basis).
The household survey reported unemployment increasing by a statistically insignificant 0.1 percentage points to 5.5 percent. A substantial increase in labor force participation explains this. Almost 400,000 Americans entered the labor force and thus were counted as unemployed if they did not find jobs. The new entrants pushed the labor force participation rate up to 62.9 percent, but this surge may simply represent statistical noise. Overall labor force participation has fluctuated within a narrow range of 62.7 percent to 62.9 percent since March of last year.
The cheery jobs report is an encouraging counterpoint to the recent first quarter gross domestic product report. The Bureau of Economic Analysis estimated the economy shrank at a 0.7 percent rate in the first three months of the year. Many analysts have suggested that problems with the bureau’s seasonal adjustment methodology may explain the apparent contraction. Other indicators—such as gross domestic income—showed the economy expanding slowly during that period. The fact that employment has grown robustly in the spring suggests the economy did not in fact contract in the winter.
