Hiring Sprung Back in May: Week of June 3 – 7

Hiring picked up in May. Here are the five things we learned from U.S. economic data released during the week ending June 7.

Payroll growth accelerated in May while the unemployment rate increased. Nonfarm payrolls expanded by a seasonally adjusted 272,000. The Bureau of Labor Statistics measure was well above its 165,000 April gain but below its March 303,000 increase. Private sector employers added a net 229,000 jobs, including 204,000 in the service sector. Payrolls grew the most in health care/social assistance (+83,500), leisure/hospitality (+42,000), professional/business services, and construction (+21,000). Average weekly earnings of $1,197.41 were up 3.8 percent from a year earlier.

The separate household survey finds the unemployment rate edging up 1/10^th of a percentage point to 4.0 percent, while the labor force contracted by 250,000 people. The labor force participation dropped by 2/10^ths of a percentage point to 62.5 percent, with the rate for 25-54 year olds added 1/10^th of a percentage point to 82.5 percent (its highest since 2002). The typical length of unemployment grew by 2/10^ths of a week to 8.9 weeks. The number of part-time workers who desire full-time work narrowed by 50,000 to 4.419 million. The broadest measure of labor underutilization—the U-6 series—held steady at 7.4 percent.

Manufacturing activity slowed in May. The Institute for Supply Management’s Manufacturing PMI shed a half point to 48.7. The Manufacturing PMI has been under 50.0—the threshold between an expanding and contracting manufacturing sector—for two consecutive months and 18 of the past 19 months. Falling were indices for new orders, production, and inventories, while the employment measure improved. Only seven of 18 tracked manufacturing industries expanded during May, led by printing, petroleum/coal, and paper products. The press release notes, “[d]emand remains elusive as companies demonstrate an unwillingness to invest due to current monetary policy and other conditions.”

Meanwhile, the service sector rebounded in May. The ISM’s Services PMI rose 4.4 points to 53.8. This pushed the Services PMI back above 50.0 for the 46^th month over the past 48 after indicating a contraction in April. Indices for business activity/production, new orders, and employment improved, while inventories took a step backward. Thirteen of 18 tracked service industries reported growth, led by real estate and health care/social assistance. According to the press release, a “majority of respondents indicate that inflation and the current interest rates are an impediment to improving business conditions.”

While still inflated, the number of unfilled jobs continued to shrink in April. There were a seasonally adjusted 8.059 million job openings, down 296,000 from March and 18.6 percent from a year earlier. The Bureau of Labor Statistics report indicates there were 7.174 million unfilled jobs in the private sector, with at least a million openings in leisure/hospitality, health care/social assistance, and professional/business services. Creeping up was hiring, growing by 23,000 to 5.640 million. This was off 5.2 percent from a year earlier. 5.372 million people separated from their jobs, up 42,000 from March but down 3.5 percent from April 2023. 3.507 million people quit their jobs (+98,000 from April but off 2.9 percent from a year earlier). Layoffs declined by 86,000 to 1.515 million (-7.4 percent versus April 2023).

Factory orders picked up in April. The Census Bureau estimates new orders for manufactured goods increased 0.7 percent to a seasonally adjusted $588.2 billion. Orders thus far in 2024—$2.282 trillion—were up 1.1 percent over the comparable 2023 months. Durable (+0.6 percent) and nondurable (+0.8 percent) saw orders grow. Shipments jumped 1.0 percent to $590.2 billion, with year-to-date shipments ($2.291 trillion) 2.0 percent ahead of their year-ago pace. Unfilled orders swelled 0.2 percent to $1.401 trillion, while inventories expanded $0.9 billion to $858.3 billion.

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending June 1, 2024, First-Time Claims, seasonally adjusted): 229,000, +8,000 vs. the previous week, +24,000 vs. the same week a year earlier). 4-week moving average: 222,250 (-5.2% vs. the same week a year earlier).
• International Trade (April 2024, Trade Deficit, seasonally adjusted): -$74.6 billion (March 2024: -$68.6 billion; April 2023: -$72.8 billion).
• Vehicle Sales (May 2024, Automobile and Light Truck Sales, seasonally adjusted annualized rate): 15.901 million (+0.8% vs. April 2024; +2.5% vs. May 2023.
• Construction Spending (April 2024, Value of Construction Put in Place, seasonally adjusted annualized rate): $2.099 trillion (-0.1% vs. March 2024; +10.0% vs. April 2023).
• Productivity (2024Q1-revised, Nonfarm Labor Productivity, seasonally adjusted annualized rate): +0.2% vs. 2023Q4; +2.9% vs. 2023Q1).
• Wholesale Trade (April 2024, Merchant Wholesalers’ Inventories, seasonally adjusted): $895.8 billion (+0.1% vs. March 2024; -1.7% vs. April 2023).

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.