May Jobs Report: On The Surface, It Seems Good. It's Not.

Forbes

a day ago

SUNRISE, FLORIDA - JUNE 26: Job seekers attends the JobNewsUSA.com South Florida Job Fair held at ... More the Amerant Bank Arena on June 26, 2024 in Sunrise, Florida. More than 50 companies set up booths to recruit people from entry-level to management. Open jobs include police officers, food service, security, sales reps, technicians, customer service, IT, teacher assistants, insurance agents, and account executives. (Photo by)
The American job market added 139,000 jobs in May, slightly exceeding expectations of 126,000, and the unemployment rate remained at 4.2%.
Good, right? No. That would be like your doctor taking a brief glance at you and declaring you're OK without checking your blood pressure, listening to your heart and lungs, or drawing blood.
That's how deceptive this all is.
With May now in the books, 2025 is on pace to create 1.49 million jobs, the lowest number since 2010, when we were climbing out of the Great Recession. That's barely what is needed to keep with population growth, the labor force participation rate, and the employment-population ratio. Furthermore, April's numbers have been revised downward by 30,000 to 147,000, and March and April actually created 95,000 fewer jobs than originally reported. The job market is much weaker than it initially appears.
For instance, health care added 62,000 jobs in May, while leisure and hospitality created 48,000 jobs. Together, the two sectors accounted for 79% of all jobs created in May. Add the 16,000 jobs created in social assistance and we come to 90% of all jobs created in May. That kind of disproportionate growth is worrisome. A harmonious job market as a driver of a healthy economy tends to create jobs across the board, a hallmark of the job market during the previous four years, the best four-year stretch in history. Completing the picture, employment showed little change over the month in all other major industries.
Federal government employment continued to decline in May by 22,000 and is down by 59,000 in 2025. Note the rising rate in May; none of us knows the real extent of this, of course, as many of the firings that DOGE perpetrated are still in flux. But so far in 2025, three out of eight job losses in the government employment sector took place in May. We can expect more job losses in this sector.
All in all, not only did the civilian labor force shrink by 625,000, the ranks of the employed shrank by 696,000, and the ranks of the unemployed grew by 71,000. That's clearly an exodus; a significant number of people leaving the job market altogether. They just quit looking for work, and this amounts to overall job market shrinkage, a different measurement than job loss or creation. If the total population and the civilian non-institutional population grow, so should the labor force, or we'll face a growing inability to provide goods and services for both our domestic and international markets. That drop in the supply side capacity could fuel inflation.
If it's any consolation, average hourly earnings for all employees on private nonfarm payrolls rose by 0.4%, or by 3.9%, over the past 12 months.
Not only are May's numbers not what we'd like to see, the trend lines are all negative. It's not yet time to batten down the hatches, but it is time to make sure our ship is seaworthy.