The May Employment Report shows that job growth caught up to the slowdown seen in other US economic data in April. It is still not weak enough to guarantee a Fed rate cut, although it will keep alive those expectations.
The +75k m/m Payroll increase shows that jobs slowed in most industries and sectors, not just the ones typically associated with foreign trade or the business cycle. Bad weather still could have been a factor, as the comments in the May Non-Mfg ISM Report indicated. Also, some of the job weakness could be chalked up to volatility. Nevertheless, the Workweek remained low at 34.4 Hours, suggesting the economic slowdown is not about to end. Yesterday's Claims data raised the possibility that the improvement in labor market conditions has stalled. And, at this early point of the month, they did not signal a speedup in job growth in June.
To be sure, there are still a lot more data to see before a reliable estimate of Q219 Real GDP Growth can be made. The Atlanta Fed model's projection was up to 1.5% yesterday. And, some economic data, such as Retail Sales, should pick up in May. If upcoming data add up toward 2.0% Q219 Real GDP Growth, job growth should respond albeit with a lag.
The Household Survey was not as weak as the Establishment Survey, but still suggests a slowdown. Civilian Employment rose 113k m/m -- modest. The Employment-Population Ratio and Participation Rate have been steady for the past 2-3 months. The unchanged 3.6% Unemployment Rate remained well below the 3.9% Q119 average, however, arguing against Q219 GDP Growth being sharply below trend.
Labor cost inflation slowed a bit in May, consistent with calendar considerations. The below-consensus 0.2% m/m increase in Average Hourly Earnings (0.22% unrounded) pushed down the y/y to 3.1% from 3.2%. However, calendar considerations point to a 0.3% m/m increase in June AHE. The y/y would rebound to 3.2%. The trend remains flat and in line with most other measures of labor cost inflation.
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