Contrary to expectations of a modest 226K increase in nonfarm payrolls, according to the BLS in May the US added a whopping 280K jobs, with the April print revised from 223K to 221K, but March revised higher from 85K to 119K. This was the highest monthly increase in payrolls since December of 2014. The unemployment rate rose from 5.4% to 5.5% on the number, as the number of employed Americans according to the Household Survey also rose by an almost equal 272K.
But while the strong jobs number will surely grab Yellen’s attention, what is most notable is the jump in average hourly earnings, which rose by 0.3%, above the 0.2% expected, and well above the 0.1% in April, suggesting the slack in the labor force is indeed evaporating. Another way of showing the wage growth, is that it rose 2.3% in May from a year ago, which was the highest annual increase since 2009!
Another way of seeing the wage growth is comparing it to the civilian employment-to-population rate, traditionally the best correlation, which rose from 59.3% to 59.4%, while wages grew by 2.3% in May, the biggest annual increase since 2009.
Judging by the kneejerk market reaction, the jobs data is strong enough to give Yellen a green light not only for a September rate hike, but even potentially keeps June in play.
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More details from the report:
Total nonfarm payroll employment rose by 280,000 in May, compared with an average monthly gain of 251,000 over the prior 12 months. In May, job gains occurred in professional and business services, leisure and hospitality, and health care. Employment in mining continued to decline. (See table B-1.)
Professional and business services added 63,000 jobs in May and 671,000 jobs over the year. In May, employment increased in computer systems design and related services (+10,000). Employment continued to trend up in temporary help services (+20,000), in management and technical consulting services (+7,000), and in architectural and engineering services (+5,000).
Employment in leisure and hospitality increased by 57,000 in May, following little change in the prior 2 months. In May, employment edged up in arts, entertainment, and recreation (+29,000). Employment in food services and drinking places has shown little net change over the past 3 months.
Health care added 47,000 jobs in May. Within the industry, employment in ambulatory care services (which includes home health care services and outpatient care centers) rose by 28,000. Hospitals added 16,000 jobs over the month. Over the past year, health care has added 408,000 jobs.
Employment in retail trade edged up in May (+31,000). Over the prior 12 months, the industry had added an average of 24,000 jobs per month. Within retail trade, automobile dealers added 8,000 jobs in May.
Construction employment continued to trend up over the month (+17,000) and has increased by 273,000 over the past year.
In May, employment continued on an upward trend in transportation and warehousing (+13,000). Truck transportation added 9,000 jobs over the month.
In May, employment continued to trend up in financial activities (+13,000). Over the past 12 months, the industry has added 160,000 jobs, with about half of the gain in insurance carriers and related activities.
Employment in mining fell for the fifth month in a row, with a decline of 17,000 in May. The loss was in support activities for mining. Employment in mining has decreased by 68,000 thus far this year, after increasing by 41,000 in 2014.
Employment in other major industries, including manufacturing, wholesale trade, information, and government, showed little change over the month.
The average workweek for all employees on private nonfarm payrolls remained at 34.5 hours in May. The manufacturing workweek was unchanged at 40.7 hours, and factory overtime remained at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged up by 0.1 hour to 33.7 hours. (See tables B-2 and B-7.)
In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $24.96. Over the year, average hourly earnings have risen by 2.3 percent. Average hourly earnings of private- sector production and nonsupervisory employees rose by 6 cents to $20.97 in May. (See tables B-3 and B-8.)
The change in total nonfarm payroll employment for March was revised from +85,000 to +119,000, and the change for April was revised from +223,000 to +221,000. With these revisions, employment gains in March and April combined were 32,000 more than previously reported. Over the past 3 months, job gains have averaged 207,000 per month.
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