Employers increased their payrolls by just 38,000 positions in May. That was a big disappointment and was the lowest monthly job increase in more than five years. Yes, the unemployment rate dropped to 4.7%, but that was in part the result of more people dropping out of the labor force, though the number of unemployed people decreased as well.
What’s worse, nearly all of the sectors of the economy that we consider to be harbingers of where GDP is headed (such as manufacturing instead of, say, health care or education) saw drops in employment.
So why was the jobs number was so surprisingly bad? One explanation could be the weather. The mild winter allowed construction companies to continue to operate over the winter, so they haven’t been hiring as much this spring.
What’s more, the Bureau of Labor Statistic’s numbers are seasonally adjusted—penalizing sectors that normally hire this time of year, and giving them credit in other months when they don’t. (This smooths out the jobs number throughout the year.) So last month, for instance, the construction sector actually added 135,000 jobs. But if you go by the BLS’s seasonally adjusted numbers, which are used to calculate the over-gain of 38,000 jobs, it makes the construction sector look like it lost 15,000 jobs in May.
So the weak jobs number may not be as weak as it looked. Here’s six charts that break down what really happened in hiring in May.
Yes, 38,000 was a disappointment, but in terms of total jobs we are still well above where we where at the start of the past recession.
Clearly the pace of job hiring is slowing in 2016. That could be because the economy is slowing. It could also be because at the end of a number of years of jobs gains, there are fewer people out there looking for work.
The sectors that are generally considered economically sensitive mostly lost jobs in May. That’s not a good sign.
Another worrying sign, the number of workers who said they were only able to find part-time work because of economic reasons jumped in May.
Also, the growth of discouraged workers this many years since the recession is surprising. Some of this could be due to retiring baby boomers.
Blame the weather. Sort of. The silver lining is the BLS’s seasonal adjustments. There is a reason to believe that they don’t work during mild winters. Without the adjustments, hiring looked strong.
