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U.S. Unemployment Down, But Job Growth Stagnates

The May report from the U.S. Bureau of Labor Statistics has something for everyone: Good indicators, bad indicators, and a near-historic low in overall unemployment. So is there a clear overall takeaway?

After relatively modest job growth of 174,000 for April, May brought a serious nosedive. With total growth dipping to a mere 138,000 jobs added for May, the slowdown equates to a 20 percent speed bump. That said, unemployment also dropped by 0.1 percent to 4.3 percent, the lowest level recorded since 2001.

 

Ed T 7 2 2017 Figure 1

Source: U.S. Bureau of Labor Statistics Databases, Tables & Calculators — Unemployment Rate 2000-2017

 

The last time U.S. unemployment dropped below 4 percent was in December 2000. That’s a range of values that occurs in only that one year (2000) over the entire period from 1976 to the present day! At the same time, labor force participation is also dropping, currently at 62.7 percent for May.

 

Wages are up slightly, up by 4 cents per hour to an average hourly wage of $26.22, and up 63 cents over the past 12-month period. And indeed, with unemployment at a near-historic low, wages are bound to rise. That’s because this level of employment means that everyone who wants a job already has one — so employers need to pay more to induce people already working to move into new positions.

 

I’m a little troubled about the recent trend in job growth, however. Our fearless leader’s promises of faster job growth notwithstanding, the past three months have shown something of a stall in that rate. The current jobs report, in fact, revises April numbers down from 211,000 to 174,000 jobs added for that month.

 

The tally from March also dropped off, from 79,000 to 50,000 jobs. That puts average monthly job growth over the past quarter (March through May) at only 121,000 jobs, down by more than 50,000 jobs monthly from the same growth rate of 186,000 jobs/month over the one-year period from May 2016 through April 2017. That trend is heading in the wrong direction!

 

A closer look at where growth is occurring, jobs-wise, shows the following upticks:

 

● Professional and business services was the big gainer for May, with 38,000 jobs added that month. This is, however, down from the average monthly gain over the past twelve months of around 46,000 jobs per month (though the YTD average for 2017 remains in line with that number).

 

● Food services and drinking establishments also continue to grow, at 30,000 jobs for May. Over the last 12 months, this sector has added 267,000 jobs, so this month’s figures actually beat the average over that period.

 

● Health care gained 24,000 jobs in May, with ambulatory health care jobs bumping up by 13,000, and hospital jobs up by 7,000. Healthcare job growth is slowing, though: That figure has averaged 22,000 jobs monthly in 2017, versus 32,000 monthly in 2016.

 

● Mining jobs continue their recent, post-election upswing, with 7,000 jobs added for May. Since last October, this sector has added 47,000 jobs, for something under 8,000 jobs per month.