Between Jobs

Are we working hard, or hardly working?

Man shoveling at construction site. Photo: Igor Ovsyannykov. Source: Fancycrave

Both. The unemployment rate declined to its lowest level since 2001. Employers added jobs for the 80th straight month – the longest such streak on record. Wages are up 2.5% from a year ago – more than the 2% wage gains we were seeing last year, and significantly more than the 1.5% inflation rate.

But unemployment fell because people are leaving the workforce. The labor force shrank by almost half a million people in May, as baby-boomers retire and others leave the job market. Why are they leaving? That’s a good reason. The labor force participation rate for prime-age workers, aged 25 to 54 years old, has been falling for the last 20 years, and especially dropped off after the Great Recession, although it’s recently started to recover. But this last month didn’t help.

Source: St. Louis Fed

My biggest worry is the declining rate of job creation. Job growth in terms of the number of jobs seems steady, but the growth rate has declined modestly as a percentage of the total job market. Just two years ago the rate of job creation was accelerating, growing at more than 2.2% per year. Now it’s about 1.5%

Source: BLS

Maybe it’s the “retail apocalypse”: over the past four months, online sellers have added 12,500 jobs, while the rest of the retail sector has cut 92 thousand positions. Department stores have been especially hard hit. It’s worth keeping an eye on the retail sector. There are more than 16 million retail jobs in the US. Or maybe employers are just running out of people to hire. The number of job openings is still near a record level, even as the rate of hiring seems to be slowing.

While May’s employment report was disappointing, the job market isn’t in trouble yet. The unemployment rate is very low, and employers are creating more jobs than there are new workers entering the market. It’s really too soon to start worrying. But it’s not too early to start paying attention.

Douglas R. Tengdin, CFA

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