Last Friday (June 2, 2023), the U.S. Bureau of Labor Statistics (BLS) released the latest labor market data—— Employment Summary – May 2023 – This suggests that the US labor market may be at an inflection point, but certainly not contracting at a rate consistent with significant inflation. Net job growth continued to be weak despite conflicting payroll and survey data. Still, the current rate of decline is consistent with a looming recession. We’ll see in the June data whether the slowdown has become a trend.
Overview May 2023 (seasonally adjusted):
- Employment rose by 339,000 – a slight increase over the past few months.
- The Labor Force Survey showed a net decrease of 310,000 total employment (-0.19%) – a notable decline following last month’s slowing results.
- The net increase in the labor force was 130,000 (0.08%).
- The participation rate remained unchanged at 62.6%.
- Measured total unemployed rose by 440,000 to 6.087 million.
- The official unemployment rate rose 0.3 percentage points to 3.7%.
- The broad measure of labor underutilization (U6) rose 0.1 point to 6.7%.
- The employment-to-population ratio fell 0.1 percentage point to 60.3% (still well below the May 2020 peak of 61.2).
For those who are confused about the difference between payroll (agency) data and household survey data, you should read this blog post – The U.S. labor market is in bad shape – I explain the differences in detail here.
Some months have very small differences, while others have large differences.
Salary Employment Trends
The U.S. Bureau of Labor Statistics states:
Total nonfarm payrolls rose by 339,000 in May, in line with the 341,000 average monthly gain in the prior 12 months.work in may
Gains appear in professional and business services, government, healthcare, construction, transportation and warehousing, and social assistance…Professional and business services added 64,000 jobs in May, following a similar increase in April…
Government sector payrolls rose by 56,000 in May, compared with the 42,000 monthly average for the previous 12 months.employment in government
That was 209,000, or 0.9%, below the pre-pandemic level in February 2020.Health care added 52,000 jobs in May, similar to the 50,000 monthly average for the previous 12 months…
Employment in leisure and hospitality continued its upward trend in May (+48,000)…still 349,000, or 2.1%, below its February 2020 level.
Construction added 25,000 jobs in May… Over the past 12 months, construction has added an average of 17,000 jobs per month.
Transportation and warehousing employment rose by 24,000 in May … Transportation and warehousing employment has not trended significantly in recent months.
Employment on social assistance rose by 22,000 in May, in line with the 23,000 average gain per month for the preceding 12 months…
Employment in other major industries was little changed in a month…
All in all, there are no signs of a looming recession, despite a sharp decline in average monthly net job creation in 2022.
The first graph shows the monthly change in employment (in thousands, expressed as a 3-month moving average to remove monthly noise). The red line is the annual average. Observations between January 2020 and January 2020 were excluded as outliers.
However, some industries have still not regained the jobs lost in 2020-21.
The next graph shows the same data in a different way — in this case, the graph shows the average monthly net change in wage employment (real) over the calendar years 2005 to 2023.
The red marks on the columns are the results for the current month.
Average monthly change – 2019-2023 (000s)
| Year | Average Monthly Employment Change (000s) |
| 2019 | 163 |
| 2020 | -774 |
| 2021 | 606 |
| 2022 | 399 |
| 2023 (present) | 314 |
Labor Force Survey Data – Employment Contracts
This month we see a marked discrepancy between wage data and household (labor force) survey data. If you want to understand why this discrepancy occurs, see the link above.
Seasonally adjusted data for May 2023 shows:
1. Total employment in the Labor Force Survey decreased by 310,000 net (-0.19%) – a notable decline following last month’s slowing results.
2. The net increase of the labor force was 130,000 (0.08%).
3. The participation rate remained unchanged at 62.6%.
4. As a result (in accounting terms), the total number of unemployed increased by 0.44 million to 6.087 million and the official unemployment rate increased by 0.3 percentage points to 3.7%.
Trying to reconcile this month’s wage and labor force survey data is difficult, but the overall message is that the U.S. labor market is losing steam, but not at the rate of recession we expected.
The chart below shows monthly job growth since January 2008 and excludes extreme observations (outliers) between May and January 2020 that distort the current period relative to the pre-pandemic period.
The employment-to-population ratio is a good indicator of the strength of the labor market because the denominator, population, is not particularly sensitive to cycles (unlike the labor force), so movements are relatively clear.
The graph below shows the US employed population from January 1950 to May 2023.
In May 2023, the rate fell by 0.1 percentage points to 60.3% – a modest decline.
The pre-pandemic peak level was 61.1% in May 2020.
Unemployment and Underutilization Trends
The U.S. Bureau of Labor Statistics states:
The unemployment rate rose 0.3 percentage points to 3.7% in May, and the number of unemployed increased by 440,000 to 6.1 million. Since March 2022, the unemployment rate has been between 3.4% and 3.7%.…
Long-term unemployed (those who have been out of work for 27 weeks or more) were essentially flat at 1.2 million, or 19.8% of the total…
The number of people working part-time for economic reasons was little changed at 3.7 million in May. These are individuals who would have preferred to work full-time but are forced to work part-time due to reduced hours or the inability to find full-time employment.
As a result, the U.S. labor market shifted from being fairly static over the past few months to slightly softer this month. We’ll see in the next month whether a worsening trend has emerged.
The first graph shows the official unemployment rate since January 1994.
The official unemployment rate is narrow Measures of labor waste, which imply strict comparisons with the 1960s, for example, in terms of tightness in the labor market, must take into account broader measures of labor underutilization.
The figure below shows the BLS metric U6, which is defined as:
Total unemployed, plus all marginalized workers plus total number of people working part-time for economic reasons, as a percentage of all civilian labor force plus all marginalized workers.
As such, it is the broadest quantitative measure of labor underutilization published by the BLS.
Pre-COVID, U6 was 6.8% (January 2019).
In May 2023, the U6 indicator was 6.7%, up 0.1 percentage point due to rising unemployment, while other determinants were largely unchanged. It is still 0.2 percentage points above the December 2022 level.
How is wage growth in the US?
The U.S. Bureau of Labor Statistics reports:
Average hourly earnings for all private nonfarm employees rose 11 cents, or 0.3%, to $33.44 in May. Average hourly earnings have increased 4.3% over the past 12 months. Average hourly earnings for private-sector production and nonsupervisory employees rose 13 cents, or 0.5%, to $28.75 in May.
Newest – BLS Real Earnings Summary – April 2023 (posted May 10, 2023) – Tell us:
On a seasonally adjusted basis, real average hourly earnings for all employees increased 0.1% from March to April…this result was driven by a 0.5% increase in average hourly earnings and the Consumer Price Index (CPI-ü) for all urban consumers .
From April 2022 to April 2023, real average hourly earnings fell 0.5% on a seasonally adjusted basis. The change in real average hourly earnings combined with a 0.6% decline in average weekly hours worked resulted in a 1.1% decline in real average weekly earnings. period.
Overall, inflationary pressures are easing rapidly, with nominal wage growth starting to lead to modest real wage growth.a good sign
The table below shows the change in nominal Average Hourly Earnings (AHE) by industry and inflation-adjusted AHE by industry in May 2023 (note that we are using February CPI for the adjustment – this is the latest The data).
Note that for private employees, real average hourly earnings continue to decline each month.
There is also considerable variation across industries, with most industries starting to see modest real wage growth last month.
The graph below shows the annual growth rate of real average hourly earnings from 2008 to May 2023.
Real wage cuts have slowed, and it is hoped that workers will start enjoying sustained real wage growth.
Another indicator that tells us whether the labor market is shifting in favor of workers is the turnover rate.
The latest BLS data — Job Openings and Labor Turnover Summary (Published May 4, 2023) – states:
The number of job vacancies edged up to 10.1 million on the last working day of April… and throughout the month, hiring was little changed at 6.1 million. Total separations fell to 5.7 million. Among separations, layoffs (3.8 million) were little changed, while layoffs and layoffs (1.6 million) decreased…
In April, the number of people who quit smoking and the rate of smoking cessation did not change much, being 3.8 million and 2.4% respectively.
Therefore, as of April 2023, the smoking cessation rate has not declined. We’ll see if the data for May 2023 show that the slowdown is becoming entrenched.
in conclusion
In May 2023, the latest US labor market data showed that net job growth continued to weaken despite conflicting payroll and survey data, but showed no signs of an imminent recession.
Overall, the U.S. labor market may be at an inflection point, but certainly not contracting at a rate consistent with an impending recession.
We’ll see in the June data whether the slowdown has become a trend.
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
