Employment Surprises on the Upside

The creation of 175,000 jobs in May by the U.S. economy, as reported by the Bureau of Labor Statistics, was taken as good news mainly because economists, pundits, and investors were expecting a mediocre or worse report (even though it was only a little better than mediocre).

The creation of 175,000 jobs in May by the U.S. economy, as reported by the Bureau of Labor Statistics on Friday, was taken as good news mainly because economists, pundits, and investors were expecting a mediocre or worse report (even though it was only a little better than mediocre). The change in payroll employment for March was revised from 138,000 to 142,000, but the change for April was revised from 165,000 to 149,000, so employment gains in March and April combined were 12,000 less than previously reported.

Besides the headline numbers, some other parts of the May BLS report were reasonably good. For example, the number of long-term unemployed (those jobless for 27 weeks or more) was unchanged at 4.4 million in May, but over the last 12 months the number of long-term unemployed declined by 1 million. The long-term unemployment accounted for 37.3 percent of the total unemployed.

Professional and business services added 57,000 jobs in May, and that segment of the economy has grown by 589,000 over the past year. Within leisure and hospitality, employment in food services and drinking places continued to expand, increasing by 38,000 in May and by 337,000 over the past year. Retailers created a net of 28,000 positions in May, and the industry has added an average of 20,000 each month jobs during the last 12 months.

Health care has also been a consistent source of new jobs. The industry added 11,000 positions in May, and averaged 24,000 each month for the last 12 months. The federal government, however, which is just beginning to feel the squeeze of sequester, shed 14,000 jobs in May. Over the last three months, federal employment has shrunk by 45,000 positions.

Rail traffic up in May

The Association of American Railroads reported on Friday that total U.S. rail traffic increased during May. In fact, May saw the first year-over-year monthly increase in total carloads in 16 months, and the 42nd straight monthly increase in intermodal traffic, both of which are indirect indications of moderate (but still uneven) growth in the U.S. economy.

“The economy is still not firing on all cylinders, and rail traffic in May reflects that,” said AAR senior vice president of policy and economics John Gray. “Pockets of rail traffic growth, such as autos, nonmetallic minerals, and commodities related to crude oil extraction are being countered by continued weakness in steel-related commodities, paper, and grain, among others.”

Wall Street showed enthusiasm for the relatively positive employment numbers by spiking upward on Friday by 207.5 points, or 1.38 percent. The S&P 500 advanced 1.28 percent, while the Nasdaq gained 1.32 percent.