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Disappointing Job Data for May

Despite estimates for non-farm payrolls in May remaining in the 150K-200K range among at least a plurality of analysts, just 75K new jobs were created last month, according to the U.S. Bureau of Labor Statistics (BLS). The Unemployment Rate stayed unchanged at a 50-year low 3.6%, with both Wage Growth and Labor Force Participation slipping.

Revisions to the past two months also displayed softer headlines — April’s initially reported headline of 263K fell to 224K, while March’s 189K (originally released as 196K) slipped to 153K. This amounts to 75K fewer jobs created in the past two months, combined with the 100K fewer than expected last month. As we saw in ADP’s ADP private sector report Wednesday, we finally see some weak data in our multi-year robust labor market.

Average Hourly Earnings rose 6 cents, or +0.2% month over month, to $27.83. This creates a 3.1% gain year over year, which remains historically weak, considering we remain at 3.6% on Unemployment. Labor Force Participation came in at 62.8%, ultimately flat but lower than the 63%+ we had been used to seeing in these monthly data reports. In a spot of good news, the U-6 (aka “real unemployment”) fell to a very low 7.1% from 7.3% last read. For a bit of context, getting under 10 on the U-6 a few years ago was considered a major accomplishment.

Overall, jobs gains for the past 3 months average out to 151K — lower than we’d grown accustomed to, but still higher than the jobs market needs to make up for baby boomer retirees. This also comes in-line with the ADP’s 3-month average of 152K. Thus, we can take this disappointing headline and still recognize a healthy labor situation in the U.S., even if it is below what we’d come to expect.

Yet wage growth at +0.2% indicates all this positive jobs data isn’t generating the wealth for the workforce analysts would have expected. So in addition to a lower monthly jobs report — and without mentioning the two-fronted trade war begun by the Trump administration — this slowing rate of wage payment does point to a slowing economy overall. And this may back up analysts looking for the Fed to cut interest rates sometime this year, quite possibly this summer.

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