Nonfarm Payrolls Increased More Than Expected
We've experienced an abnormally newsworthy week for the stock market, but arguably this morning brings us the biggest news of all: the May Employment Situation report from the U.S. Bureau of Labor Statistics (BLS). Headline jobs growth came in at +139K — +14K higher than the +125K anticipated. The Unemployment Rate from the Household Survey repeats for the third-straight month at an historically low +4.2%.
Revisions to the previous months are considerable, though. April's original +177K has been reduced by -30K to +147K this morning. March's previous +185K has shrunk to +120K today. In fact, that March number, back when it was originally posted, was +228K — more than +100K higher than we now see.
Through 2025 so far, based on these revisions, we're now range-bound between +110-150K new job gains. This is good and positive — and does provide more jobs than needed to account for new retirees per month — but it is demonstrably coming down. Full-year 2024, even with notably weak job gains in the summertime, averaged +164K per month.
Hourly Wages ticked up to +0.4%, 10 basis points (bps) higher than expected and double the wage growth in April. Year over year, this brings us to +3.9% — this is where we were in January and February this year. This demonstrates continued economic resilience, but will keep Fed rate cuts at bay for now.
The Average Workweek also remained consistent at 34.3 hours, now for the third straight month. But Labor Force Participation dropped 20 bps to 62.4%, which is the lightest print year to date, and the lowest we've seen since December of 2022. The U-6, aka 'real unemployment,' reached 7.8% for the second-straight month.
By sector, Healthcare provided +68K new positions filled last month. Leisure & Hospitality illustrated a still-healthy travel & leisure economy with +48K new jobs. But government jobs shed -22K (-59K from the start of the year; there were many more layoffs than that, likely resulting in severance packages or outright retirement), Manufacturing lost -8K and Retail was -6.5K. This begs the question whether the consumer is feeling the strength in the overall economy.
Pre-market futures are breathing a sigh of relief this morning, especially following the paltry +37K jobs posted on private-sector payrolls from ADP (ADP) on Wednesday. The Dow was +150K ahead of the BLS report and has now roughly doubled. The S&P is presently up +45 points, on its way back to 6K. The tech-heavy Nasdaq is adding +180 points at this hour.
Bottom-line: slowing employment growth is still employment growth, and this equals economic growth. It won't bring us lower interest rates from the Fed next week, but those weren't expected anyway. And, as news programming clogs its headlines with news of the public spat between Elon Musk and President Trump, we can see that the underlying U.S. economy continues to chug along.
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