Jobs Report Shows Cooling Economy
Total non-farm payroll employment edged up in May (+75,000), and the unemployment rate remained at 3.6%, the U.S. Bureau of Labor Statistics reported today.
The gain was far smaller than that reported for the previous two months, providing fresh evidence that the economy is cooling and giving the Federal Reserve another reason to cut its benchmark interest rate this month.
The unemployment rate remained at 3.6%in May, and the number of unemployed persons was little changed at 5.9 million. Both the labor force participation rate, at 62.8%, and the employment-population ratio, at 60.6%, were unchanged in May.
Average hourly earnings for all employees on private non-farm payrolls increased by 6 cents to $27.83. Over the year, average hourly earnings have increased by 3.1%.
Monthly job gains have averaged 164,000 in 2019, compared with an average gain of 223,000 per month in 2018. Construction employment changed little in May (+4,000), following an increase of 30,000 in April. The industry has added 215,000 jobs over the past 12 months.
Mike Fratantoni, SVP and chief economist at the Mortgage Bankers Association, said, “Economic growth is clearly slowing, as indicated by the slower pace of job growth in May, downward revisions in prior months, and a leveling out of wage growth. The job market remains tight, but this report, coupled with other recent data, shows a distinct cooling of the economy this spring.
He added.”For the housing market, this slowdown in job growth somewhat offsets the benefits of lower mortgage rates, but we still expect modest growth in home sales and purchase mortgage originations this year.”
Lawrence Yun, chief economist for the National Association of Realtors, saw the May numbers in a more positive light. ““Another month of job additions will fuel housing demand, especially in the starter home market. 75,000 net new jobs in May is not as strong as in prior months, but nonetheless implies continued economic expansion and solid consumer confidence,” said Yun. “In fact, it is nearly assured that America will have achieved the longest economic expansion ever in July of 121 straight months of economic growth.”
Yun then turned to home-building. “One slow sector, but with huge potential for many months of expansion, is in the housing sector. There is a housing shortage. More home building means more hiring of people in the construction sector and thereby will provide a boost to local economies. Only 4,000 construction jobs were added in May. Another 200,000 construction jobs would be needed just to reach the prior peak employment in the sector and help relieve the housing shortage. Average weekly earnings in the construction sector was $1,199 in May, compared to $957 in overall private sector jobs.”