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3 Sectors Took a Nosedive in Latest Jobs Report

So much for high expectations.

Economists had estimated that 185,000 jobs would be added in May. Instead, numbers out today show that only 75,000 positions were added. And those only made up for the 75,000 job downward revision for March and April.

“Even if the labor market and overall growth are just downshifting for cyclical reasons, that suggests less capacity to absorb a negative shock,” said Joshua Wright, a former Fed staffer and chief Economist at recruitment software company iCIMS. It’s not a “red alert” time but shows “less margin for error.”

Beyond that, three sectors had an especially tough month.

Retail

The apparel consumer sales sector, which lost 12,700 jobs, has been particularly hard hit in the misery that has become retail, with overall pressure driven by high debt and rising tariff rates. China is the source of almost 45% of all apparel and textile sales in the U.S., according to data from IHS Markit.

“Employment in the clothing retail segment continues its steep decline again this month as an increasing number of key players in that segment are either closing all of their locations or downsizing in aggressive ways,” said Victor Claar, an associate professor of free enterprise at Florida Gulf Coast University’s Lutgert College of Business. “The latest firms shutting at least some of their doors include Dressbarn which just last month announced they are shuttering doors at all 650 locations.”

Retail sales have also seen weakness, as Wright points out, and so store operators might well cut positions. “It’s also important to keep mind the ongoing deep disruption from e-commerce as direct-to-consumer business models are still on a structural uptrend,” he said.

Construction

Construction is a particularly weather-dependent industry. The loss of 9,400 jobs is probably an issue of timing and climate events.

“Heavy and civil construction includes projects such as road and highway construction,” Claar said. “These projects are frequently disrupted by weather events such as flooding, tornadoes, and hurricanes, like the recent spate of tornadoes in the Midwest.”

Massive flooding, which splayed across much of the country, is another reason why activity would have to be halted. The bad-news-but-good-news is that with the damage done, repairs will be necessary, likely driving an increase in sector employment.

Education

Even with seasonality, the loss of 14,400 education jobs at the state and local levels seemed heavy and beyond what one might have expected given historical data.

However, this result might be a combination of timing and survey methods. As Wright pointed out, teacher strikes would be a “potential contributing factor.” And that’s where timing and survey methods come in. Government numbers of employment depend on people answering that they worked within the previous week. People on strike would be counted as unemployed and North Carolina teachers went on strike in May.

Then there’s the low pay that has sent teachers quitting at a record pace.

One month does not a trend make. Market watchers will be paying greater attention to jobs numbers for June and July to see if May was just a blip—or a harbinger of hard times ahead for workers.

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