Not surprising any more

In truth, the only surprising thing about the US employment data released this morning is that people are still affecting to be surprised when the numbers are strong. We'll get to the actual data in a second, but maybe the most interesting statistic of the day is this: according to Bloomberg, today's number marks the fourteenth consecutive month that job creation in the US has come in above the market consensus.  How does that saying go again? Fool me once, shame on you -- fool me fourteen times, shame on me. 

The BLS data reveal that non-farm payrolls rose 339,000 in May, and there were notable upward revisions to the data for the two preceding months.  So far in 2023, the average monthly rise in payrolls has been about 310,000. That's down from an average of almost 400,000 per month in 2022, but well above the sub-200,000 monthly pace of job gains seen pre-pandemic.

Somewhat surprisingly, the unemployment rate ticked up to 3.7 percent in May from 3.4 percent in April. This number is calculated from the "household survey", as opposed to the "establishment survey" that produces the payrolls number. The household survey showed a rise of 444,000 in the number of unemployed persons in May. This discrepancy is unusually large and is hard to explain, given that the labor force participation rate was almost unchanged in the month. Since the establishment survey is seen as more reliable than the household survey, it will no doubt be the headline number that is most quoted.  

The job creation numbers might suggest that the Federal Reserve cannot yet risk pausing its rate hike cycle, but the wage data tell a different story.  Average hourly earnings rose 0.3 percent in May, bringing the year-on-year increase to 4.3 percent. The Fed is likely to mark the fact that private sector hourly earnings rose 0.5 percent in the month, but there is still no real evidence of the wage-price spiral that rate hikes are supposed to forestall. Recent Fed-speak has seemed to hint that there will be at least a temporary pause in rate hikes, and for now that seems the likeliest outcome for the FOMC meeting on June 13-14.