Friday, June 03, 2005

And to think, at least one professional economist thought May job growth of 250,000 was a distinct possibility.
Nonfarm employment edged up by 78,000 in May following a much larger increase in April, and the unemployment rate was essentially unchanged at 5.1 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment continued to grow over the month in health care and construction, but was little changed in the other major industry sectors.
Putting the strong April together with the weak May, we get an average for 2005:II thus far at 176,000 jobs per month, just slightly above the level needed to simply keep pace with population growth. For the calendar year the US economy is averaging a nearly identical 180,000 jobs per month.

Note that the 2005 job growth pace is not markedly higher than the second half of 2004, which turned in a monthly average of just 162,000 jobs. And both are down noticeably from the pace of the first half of 2004 which tallied 204,000 jobs per month on average. One might to tempted to say that this "job recovery" if it can even be called that, is stalling already.

As expected by anybody reading this blog, AngryBear, Calculated Risk or Brad Setser, the construction sector was one of the few big gainers in May, adding 20,000 jobs. Within the realm of construction, it really all came down to "residential specialty trade contractors" who added 25,500 jobs. The housing boom continues to put plumbers, electricians and kitchen designers to work.

Apart from residential speciality trade contractors, the only other category at this second level of disaggregation to rack up five-figure job gains in May was health care at 25,600. No wonder unit labor costs are rising so much.

In light of the country's enormous goods trade deficit, the news that manufacturing continues to shed jobs can't be welcomed. May marks the third month in a row that the manufacturing labor force has shrunk and the tenth month of decline out of the last twelve. Manufacturing employment had been slowly declining from its recent 1998 peak until 2000, but has truly imploded since Bush became president, down 16% since January 2001.

The bad employment news sent interest rates tumbling once again, and the 10-year quickly made it down to 3.82% today. Folks can't keep their consumption levels up based on wage and salary income, so look for another round of Greenspan's ARM magic to carry the US economy through the rest of the year.

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