A Less-Than-Impressive Jobs Report

The U.S. job market had a less-than-impressive May.

Nonfarm payrolls rose by 75K in May, according to the jobs report released June 7, below consensus estimates for a 175K increase. Job gains for March and April were also revised down by 75K.

As shown in the LPL Chart of the Day (“Long-Term Trend of Solid Job Gains Still in Place”), the 12-month average jobs gain fell to 196K jobs per month amid May’s weaker payrolls gain and prior-month revisions.

Still, an average pace of about 200K in payroll gains is solid for this point in the cycle, and slowing job creation is typical for a tightening labor market. We also see strength in other job-market indicators, showing that the May stumble in payrolls may not be as disappointing as it was at first glance.

“The U.S. jobs market still looks solid for this point in the cycle,” said LPL Research Chief Investment Strategist John Lynch. “Hiring has continued at an above-average pace for the expansion, and weekly claims for unemployment benefits have dropped to cycle lows several times this year.”

Average hourly earnings rose 3.1% year over year, around its fastest pace of the cycle and at a level that should continue to bolster consumer confidence and support consumer spending. The year-over-year pace of wage growth slowed in May, but not enough to concern us about significantly slowing wage pressures. The unemployment rate stayed at 3.6%, a cycle low.

Investors have been highly skeptical of any weaker-than-expected economic data recently, given recent escalation in the U.S.-China trade dispute and signs of slowing in other sections. We understand the trade situation is unnerving, but we don’t see enough evidence to think a resurgence in trade tensions is enough to derail this expansion.


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