May Jobs Report: What is it really telling us?

Last Friday, the Bureau of Labor Statistics (BLS) released its May monthly jobs report. Though nonfarm payroll employment increased by 175,000 in May, the unemployment rate slightly increased from 7.5% in April to 7.6% in May.[1] While an overall increase in employment is a good sign, the May jobs report shows little sign that the economy is gaining any momentum. Labor force participation, the total number of unemployed persons, and job growth all point to the fact that the economy is stagnant and is showing little sign of a quick turnaround.

Facts You Need to Know:

  • The unemployment rate increased slightly from 7.5% in April to 7.6% in May.[2] The number of unemployed persons increased from 11.65 million in April to 11.76 million in May.[3]
  • Long-term Unemployment (those unemployed for more than 27 weeks) remained stagnant from last month at approximately 4.4 million Americans.[4]
  • The Labor Force Participation Rate, which identifies the number of people who are active participants in the labor force (relative to the total population), remained nearly unchanged from April at 63.4%, an increase from 63.3% in April.[5] The Employment-Population Ratio, a metric which establishes the raw employment rate, remained unchanged from April at 58.6%.[6]
  • Average hourly earnings for all employees increased by 1 cent to $23.89. In the last year, average hourly earnings have increased by 46 cents (2.0 percent).[7]

Why Does a “Pro-Growth” Agenda Matter?

  • Labor force participation remains at its lowest levels since the late 1970s. Much of the decline in the unemployment rate from the end of the recession can be attributed to a decline in labor force participation. If Labor Force Participation remained unchanged from the recession, the unemployment rate would be 10.7% instead of 7.6%.[8] Weak labor force participation remains a significant barrier to long-term economic growth, as a smaller pool of workers available for employment limits potential business expansion in goods and services-oriented industries. Strong labor force participation as the result of economic growth would broaden the tax base and increase revenue organically. 
  • The Employment-Population Ratio is unchanged since last month, signaling once again that job growth is barely sufficient to keep up with population growth. In fact the Employment-Population Ratio has only increased by .1 percent since the end of the recession in 2009.[9] This further demonstrates that Americans are still not engaging the labor market to find wage-earning employment. Because a large pool of workers is necessary to facilitate economic growth in every industry, a stagnant Employment-Population Ratio should be concerning.
  • The number of long-term unemployed should also be of serious concern. The large number of people who have been unemployed for over six months are at risk of developing into a permanently unemployed class. The psychological and economic burden that the long-term unemployed face is the direct result of discouraging economic growth and a labor market that is insufficient in encouraging youth to enter the workforce. 
  • Average hourly earnings increased only slightly since April, and have only increased by 2.0% in the last year. Wage growth remains far less than pre-recession levels, and can be attributed to the slower-than-average growth rate experienced during the current recovery.[10]

 

[8] Source: Joint Economic Committee, supra note 2

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