Non-farm businesses delivered a much stronger than expected hiring performance last month.
According to the U.S. Bureau of Labor Statistics, nonfarm hiring in the United States grew by 272,000 jobs. That is a 55% uptick from last month’s 172,000 and well above the average hiring rate of 232,000 for the previous twelve months.
Unemployment grew just by 0.1 percentage points to 4.0%. While that breaks the psychological barrier of unemployment having stayed below 4% as of April for the longest period in 50 years, it is still remarkably low given how long this steady growth business cycle has continued.
Growth by Industry Category
Leading the job boom last month was a continuing positive performance in the health care industry. Following that was growth in the leisure and hospitality industry, government, and a resurgence in the professional, scientific, and technology area.
As also happened in April, the health care area topped the list for industries bringing on new employees last month. It brought in 68,000 hires this time, up from April’s 56,000 and measurably above the average of 64,000 per month for this category since June of last year. The ambulatory health care services subsegment contributed most of this number, with 43,000 new employees on board last month. Hospitals added 15,000 and nursing and residential care facilities another 11,000.
Government employment, including state and local hiring, came in next. It brought in 43,000 new people, a result mostly in line with the previous year’s average growth of 52,000, especially for this time of year.
The leisure and hospitality category rose by 42,000 last month. That represents a substantial job from the mostly flat performance for April and bringing this year’s growth for this category more in line with the previous twelve-month average rate of 35,000. The food services and drinking services subcategory provided the lion’s share of that increase, with 25,000 hires.
Another area which jumped to surprisingly strong growth for the month was the professional, scientific, and technical services area. It increased its payroll by 32,000 in May, up from flat in April and well above its average monthly increase of 19,000 since a year ago. Management, scientific, and technical consulting services, with 14,000 new employees added, led the subcategories within this industry segment. Architectural, engineering, and related services added another 10,000. Specialized design services were slightly down, with 3,000 jobs lost this time.
Social assistance positions rose overall by 15,000 in May, continued a long-term positive track record for this industry area. Most of those new hires came from the 11,000 added to the individual and family services area. While this does represent stable growth, the numbers here are off somewhat from the previous twelve months’ mean of 22,000 hires for this segment.
Retail trade, an important indicator of expectations for the consumer industry which drives 70% of the economy, was also up in May. Job hiring here was up by 13,000, compared to 8,000/month average since June 2023. Typical for this time of the year, the building materials and garden equipment industry grew the strongest of subcategories for this industry, with 12,000 new people added. Department stores and the furniture and home furnishings areas recorded declines in hiring for the month, with losses of 5,000 and 4,000 positions, respectively.
All other major employer categories remained mostly flat on a month-to-month basis, with no major declines noted either. These included construction; financial activities; manufacturing; mining, quarrying, and oil and gas extraction; transportation and warehousing; wholesale trade; and the other services catchall segment.
Average pay rates rose by 0.4 percent for the month to a new high of $34.91/hour. That earnings rate is up by 4.1% on an annualized basis since a year ago.
Commentary
With the jobs increases continuing to beat most economists’ expectations as well as at a rate which should keep the economy growing somewhat longer in the months ahead, this represents the most positive data point yet for the economy in 2024.
The slow increase in unemployment, by just 0.1 percentage points from last month’s 3.9% to 4.0% this time, also demonstrates the relatively near-term stability of the economy.
The job growth is also happening at a time when the job market itself remains tight, with far more positions continuing to be available than there are qualified candidates to fill them. This provides jobholders and job-seekers alike with confidence that their compensations will remain stable for now.
Despite the highly competitive current job market, it is also of note that job openings last month dropped to their lowest level in three years. While that is not something the average employee tracks carefully, on a nationwide basis it is a trend which could allow employers
There are other warning signs which remain in addition to this. Increased use of credit by consumers – and at much higher rates than several years ago -- will eventually bring a sharp slowdown in consumer spending. So will inflation rates, which have defied attempts by the Federal Reserve Board to bring it down anywhere near close to the 2.0% target level the Fed would like to see. The CPI for the important all items less food and energy number worked out to an annualized rate of 3.6% for the month of April, and expectations are that it and the overall CPI will be up more sharply this summer, as energy prices increase.
Those prices, balanced against the hourly wage, mean the increased salaries which continue to be reported are holding only slightly above the cost of living increases the average consumer is facing.
Still, this does represent the 41st month in a row of continued job growth for the economy, a run which has extended since January 2021. For now, with jobs stable in almost all industries and this month demonstrating a resurgence in some areas which had been stagnant for a while, that 41 months of continued growth added to this month’s sizeable increase in hiring compared to April is a positive trend that economists now expect to remain stable for at least the summer of 2024.