The Jobs Report – May 2023

Highlight

The May employment report showed the economy added 339K during the month, easily beating expectations of 195K.  Both March and April were revised higher by a combined 93K. Private payroll growth was strong with 283K jobs added, beating the expectation of 168K.

What you need to know:

• The job gains were broad based through the economy.  The services sector added 257K jobs, better than last month’s gain of 225K.  The strongest sector was private education and health services which added 97K jobs.  Business services added 64K while leisure and hospitality added 48K.  The strength in service sector jobs is consistent with the recent strength in the ISM service sector survey.
• The household survey showed a surprising loss of 310K jobs for the month which pushed up the unemployment rate to 3.7% from 3.4%.  This divergence from the establishment survey is somewhat puzzling given the broad-based strength in the establishment survey.  Of the two employment measures the household is more expansive including self-employed workers but is subject to larger month-to-month variance so we will wait for next month’s report for corroboration.  
• Wages gains moderated slightly during the month. Average hourly earnings rose 4.3%, down from 4.4% last month.  As in prior months the wage gains are still lagging inflation as workers’ buying power continues to stagnate despite the strong employment picture. 
• On the whole, we feel this was another solid jobs report.  The recent weakness in some economic data such as the ISM manufacturing survey and retail sales has yet to be borne out in the jobs market.  The loss of jobs in the household survey is worrisome but is the only real weak part of the report.  If the CPI report later this month is also strong it may push the Fed to tighten again at their June meeting.