Event: On a seasonally adjusted basis, total nonfarm employment rose by 38,000 and the unemployment rate declined by 29 basis points to 4.69% in May, according to the U.S. Bureau of Labor Statistics (BLS) in its monthly jobs report. Temporary help services employment fell by 0.72% in May, shedding 21,000 jobs. The temporary penetration rate fell two basis points in May to 2.00%. Additionally, the rate has declined in four of the last five months since its all-time high of 2.06% in December 2015.
Background and Analysis: On a year-over-year (y/y) basis (June 2016 over June 2015), total nonfarm employment was up 1.7%, and monthly job gains have averaged approximately 204,000 over the past 12 months. Temporary help employment was up 0.6% y/y, and monthly job gains in temporary help services have averaged approximately 1,460 over the past 12 months.
The economic sectors that most drove total nonfarm employment growth in June included leisure & hospitality (+59,000), healthcare & social assistance (+58,400) and information (+44,000). Transportation & warehousing (-9,400) and natural resources & mining (-5,000) lost jobs for the month, while employment in the construction and education sectors were essentially unchanged.
BLS Revisions: The change in total nonfarm payroll employment for April was revised from +123,000 to +144,000, and the change for May was revised from +38,000 to +11,000. With these revisions, total nonfarm employment gains during the two-month period were 6,000 less than previously reported.
The change in temporary help services employment for April was revised from +5,000 to +9,800, and the change for May was revised from -21,000 to -19,000. With these revisions, temporary help employment gains were 6,800 higher than previously reported.
Staffing Industry Analysts' Perspective: Even in light of consensus expectations calling for a return to solid growth, the July employment report showed a surprisingly resilient U.S. job market as total nonfarm employment (+287K) had its best month since October 2015, a compelling reversal from the downwardly revised addition of just 11,000 in May. Information was the top performer in percentage gain for the month, at +1.6%, driven mostly by the return of workers who had fallen off the rolls last month during the Verizon strike. Strength in the leisure & hospitality and retail trade sectors suggests that consumer spending is holding up well, while healthcare remains the most consistent jobs engine.
Conversely, the weakness in transportation & warehousing, where year-over-year (y/y) jobs growth in June was just 0.8% compared to 5.0% as recently as February 2015, is concerning because that sector is widely considered a leading indicator for demand in the broader economy. Construction could only muster a flat performance, failing to materially rebound from the prior two months of declines. Moreover, despite the strong headline number for job gains this month, the y/y gain in total nonfarm employment of 1.7% is consistent with a longer-term trend of decelerating growth.
Temporary help had its biggest monthly increase of 2016 (+15.2K), and the upward revisions to April and May improve the complexion of the temporary market somewhat. However, y/y growth continues to decelerate in this sector as well, declining markedly to 0.6% in June from 3.4% at the end of 2015. Based on the hiring activity in the broader economic sectors already noted, we can infer that conditions are more favorable for professional versus commercial staffing. With a net employment decline of 41,800 so far in 2016, a few more months of temp growth would do much to restore confidence that an economic contraction is not impending.
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Monthly Employment Situation July 2016 – You do not have permission to view this object.
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