It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down.
The big headline this week was this morning’s jobs report: the U.S. unemployment rate fell to its lowest level in 16 years. The Labor Department reported this morning that 138,000 jobs were added in May, which caused the unemployment rate to dip to 4.3%. That’s a level we haven’t seen since May 2001.
Of course, the devil is in the details, and when you dig deeper into the latest jobs report, it’s not as stunning as the headlines. Wage growth—Federal Reserve Chair Janet Yellen’s favorite indicator of the health of the job market—was a paltry 0.2% in May. And the 138,000 jobs that were added last month actually missed economists’ estimates for 184,000 jobs.
In addition, both March and April’s payroll numbers were revised lower this morning. March’s job growth was revised down by 29,000 jobs, while April’s job growth was lowered by 37,000 jobs. In the past three months, an average of 121,000 jobs were added. The labor force participation rate also declined in May, falling to 62.7%.
So while the headlines are touting the 16-year low of the unemployment rate, this morning’s jobs report was actually pretty disappointing. The ADP report for May, on the other hand, was stunning. Private job growth surged to 253,000 last month, topping estimates for 170,000. In my opinion, the ADP report is more precise, but the Fed closely monitors the Labor Department’s report.
That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,