More Of The Same

by: Tim Duy
Unless you thought the job market tanked in May, the employment report contained little if any new information. The labor market continues to grind upward at a pace that most of us consider subpar, but fast enough that monetary policymakers are willing to consider pulling back on asset purchases as early as September. I don't see anything in this report that will alter the Fed's rhetoric on tapering one way or the other. Expect policymakers to continue to say "Not now, maybe in a few months."

Nonfarm payrolls rose 175k in May, just above the consensus forecast of 167k. March was revised up, April down, for a net loss of 12k compared to previous estimates. The payroll gain was almost exactly the twelve-month average:


Taken in context of the Yellen indicators, tough to say that much has changed:

The unemployment rate did tick up as the labor force rose. In theory, a rapid rise in labor force participation could dissuade the Fed from tapering as it would push back the expected date of hitting the 6.5% unemployment threshold. But the little gain in this month's report would be considered just noise at this point.

Other labor market indicators are generally holding their previous trends, for better or worse:

The lack of wages gains is a disappointment and a clear signal that plenty of slack remains in the labor market. That slack is revealed in underemployment indicators, which remain elevated and making only gradual improvement:


A hint of good news in the decline of those not in the labor force, but available for work. Perhaps an early sign of a more general acceleration in labor markets? Too early to tell, but something to watch.

Bottom line: An unexciting report. Little to change the view that the economy continues to shuffle forward despite the numerous negative shocks since the recovery began. At best, some hints of future strength in the labor force gains. Overall, little reason to believe the employment report will alter thinking on Constitution Ave.