HFF Analysis of the May 2019 BLS Employment Report

Monday, June 10, 2019

HFF is pleased to report on the latest employment expansion statistics from May 2019. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

The U.S. added a lower-than-expected 75,000 jobs in May. Figures were revised downward to 224,000 in April and downward to 153,000 in March, a net revision of -75,000. Payroll creation has now averaged around 200,000 since October 2010.

This month marks the 104th month of consecutive growth with this period of monthly gains around four and a half years longer than the prior longest streak, which was from 1986 to 1990. Unemployment remained at its almost-50-year record low of 3.6%. It has now been below 5% for 32 consecutive months and at or below 4% for 15 consecutive months.

The labor participation rate remained at 62.8%, and the civilian labor force increased by 176,000 in May. Wage growth dropped slightly to 3.1% in the year ending May 2019. February 2019’s growth rate of 3.4% remains the highest seen since 2009. 

Economists are seeing this month’s lower than expected job growth as an additional potential concern to be raised at the FOMC’s June meeting.

Payroll Creation Sees 104th Month of Positive Growth  

The current expansion cycle is similar to the one from 1991 to 2000 and greater than the 2004 to 2007 expansionary period but only after a significantly delayed recapture of the nation’s previous employment peak.  

 

 

Annualized Job Growth Steady

The U.S. created 2.15 million jobs in 2017 and 2.67 million in 2018.* The last six years’ job growth is on par with the expansionary period from 1992 to 1995.

 

 

Job Growth Positive in Almost All Major Job Sectors

In 2018, the U.S. created 2.67 million jobs, and 2.15 million jobs in 2017; however, in both years, around 40% of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors. 

Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 498,000 jobs, a year-over-year growth rate of 2.4%. This rate is slightly above the average year-over-year growth rate over the past two years of 2.3%.

Temporary Staffing accounted for only 45,000 (approximately 9%) of these positions. Education and Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 590,000 jobs in the year ending May 2019.

Construction added 215,000 jobs (up 3% year over year) in the year ending May 2019. Comparing this, construction added 338,000 jobs (up 4.9%) in the year ending May 2018.

 

 

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the labor force that is either not employed or employed only part time. The Unemployment Rate remained at its almost 50-year record low of 3.6% in May 2019, marking the 32nd consecutive month below 5%.

The Underemployment Rate fell to 7.1% in May 2019, reaching its lowest level since December 2000. Fortunately, the Underemployment Rate trend has been a descent from a 2009 high of a little more than 17%. The spread between the two rates is at 350 bps and has, overall, been compressing gradually having reached a high of 740 bps in September of 2011.

 

 

 

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The current year-over-year wage growth fell slightly, coming in at 3.1% in the year ending May 2019. The growth rate for year ending February 2019, which was 3.4%, remains the highest seen since 2009.

The past three recessions were preceded by a period of FOMC tightening, which aligns also with an average hourly earnings growth in excesses of 4%, reflecting strong economic activity, overall. 

 

 

 

*Revised numbers as of January 2019.

Sources: HFF Research, Bureau of Labor Statistics, Department of Labor, Bloomberg

Prepared by: National Research Analyst Laura Haltom

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