May’s Surprisingly Great Jobs Report May Be Hiding Bad News

The U.S. job market added 272,000 jobs in May, landing well above economist expectations of 180,000. 

The job creation, according to the latest data published by the Bureau of Labor Statistics, by was largely fueled by the service sector, particularly health care and social assistance, which alone contributed 83,500 positions. The nation’s job growth is notably higher than the revised April figure of 165,000 jobs. 

The not so good news? CNN Business reports that the unemployment rate saw a slight increase to 4%, ending a 27-month streak of sub-4% rates. This unexpected rise in unemployment was observed despite the overall positive trend in job numbers.  

Analysts from Indeed’s Hiring Lab report employment dropped by 408,000, but all of that came from workers aged 16-to-24. Unemployment for this age group is reported to have increased a percentage point. In comparison, the unemployment rate for workers ages 25-to-54 reached 3.3%.  

According to the labor bureau’s report, “Among those not in the labor force who wanted a job, the number of people marginally attached to the labor force, at 1.5 million, was little changed in May. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, edged up to 462,000 over the month.” 

Wage growth also played a significant role in this month’s economic figures. Wages rose by 0.4% from April and noted a year-over-year increase of 4.1%, which is also higher than anticipated. The recent figures provide mixed feelings for investors by challenging the notion that the labor market is significantly cooling.  

The Federal Reserve, in its upcoming Federal Open Markets Committee meeting on June 11-12, will likely consider these labor market conditions closely.