After 104 months of steady growth, The United States Department of Labor reported Friday that only a meager 75,000 new jobs were added in May—significantly lower than the 180,000 anticipated by economic experts. To further dampen enthusiasm, the two prior months’ numbers were incorrectly reported as too high. March’s job count was revised substantially lower to 153,000 from 189,000 and the April’s numbers were decreased to 224,000 from 263,000.
On the positive side, the unemployment rate remained at a 50-year low of 3.6%. However, wage gains curtailed in May. The average hourly earnings compared to last year were up 3.1%, lower than expectations.
The Bureau of Labor Services release confirmed fears that employment growth is tempering. This Wednesday, a prominent report from ADP, the organization that provides payroll services for millions of companies, drew attention and fear by stating that private payrolls increased by only 27,000 jobs. The numbers were better than what ADP predicted, but materially under the expectations of the experts.
The job growth primarily stemmed from professional and business services with 33,000 new hires. Healthcare grew by 16,000, construction by 4,000, manufacturing by 3,000, while retail lost 7,600 jobs. The vast majority of other industries reflected little changes compared to the prior months.
A particular soft spot is in the manufacturing sector. In light of the threat of trade wars with China and Mexico and increasing tariffs, hiring has been put on hold due to future uncertainty.
The labor force participation rate remained steady with less than 63% of the eligible population currently working or seeking out work.
These lower numbers will not be surprising to readers of my monthly jobs report articles. I’ve argued that there have been—and continue to be—significant systemic shifts that are not being recognized. These include a vast number of people who have opted out of the workforce—and not of their own volition.
Due to the inability to find meaningful work with suitable pay, people have been forced into early retirement. In fact, Bloomberg reported that 25% of retirees were involuntarily forced into retirement due to lack of available work. Nearly half of retirees in 2018 opted out of the workforce before the age of 62 and one fourth retired between the ages of 62 and 64. Currently, the full retirement age to collect Social Security for people born in 1960 and later is 67.
Those who have finished collecting unemployment checks, but are still between jobs, are not included in the numbers, as they’ve fallen off the government radar. Then there is the rapidly growing trend of corporations relocating high-paying jobs to lower-cost states. The companies then reduce the head count of the costly employees and replace them by hiring people at far lower wages in these other cities.