Big Disappointment in Jobs Creation Data

by: TraderMark

Still digging through the numbers but the first glance is very disappointing. A net 54,000 accounting for 83,000 private sector growth, vs. a 29,000 contraction in the public sector. The estimate for May was about 175,000 a few days ago before the ADP report Wednesday.

Initial knee jerk in the S&P 500 is a drop from -0.3% in premarket to -1.0%ish. ISM non manufacturing report is up at 10 a.m. S&P currently around 1300 ...

The unemployment rate jumped to 9.1%.

The only positive on first glance is hourly earnings up 0.3%. (Year over year growth 1.8%.)

Average work week flat at 34.4 hours.

Revisions from previous two months also decreased job growth by 39,000.

The all important labor force participation rate remains at 64.2%; the same figure for five months. Hence the unemployment rate increase does not have anything to do with more people entering the work force (which would be a more benign explanation). A more normal labor participation rate would be adding roughly 2% to the unemployment rate. Please recall some 1M Americans have gone to the disability rolls in the past 2 years, which is obviously retarding the labor force participation rate at the margins. (Nearly 1 in 20 Working Age Americans are on Disability, a Doubling vs. 1990.)

U-6: Unemployed plus marginally attached dropped from 15.9% to 15.8%.

Will revise this as I look through the numbers. But considering the McJobs creation and birth death model job creation this is really a poor number. Indeed if all 62,000 McJobs created fell in May - almost the entire net growth of jobs in the private sector was due to McDonald's (NYSE:MCD). The irony is great.

Full report from BLS is here.

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