May Jobs Report: Should Recruiters Be Concerned?
The latest jobs figures landed with a thud last Friday, and it was hard to miss the worries that accompanied the lower than expected May report. The U.S. labor market has added an average of almost 220,000 jobs every month over the last year, and many analysts expected about 160,000 this month. Instead, the BLS reported just 38,000 new jobs created.
And it wasn’t just the payroll figure that left many concerned. Even though job gains were weaker, the unemployment rate actually fell to 4.7%, the lowest in almost 10 years. But labor force participation, which counts all Americans 16 and up known to be working or actively looking for work, fell slightly to 62.6%. At the same time, average hourly wages increased to $25.59
So what’s really going on in the jobs market, from a recruiter’s perspective? Was May just a fluke, and are these monthly fluctuations really not worth worrying about? Or are the trends shifting away from an economy that consistently adds new jobs? We think the jobs report should always be taken with a grain of salt, but there are some interesting points recruiters should keep in mind.
Where Are the Jobs?
Let’s start with last month’s hirings and firings. The big news was the strike by Verizon workers, which led directly to 35,000 employees not being counted in the BLS figures. So had the telecom strike been resolved sooner, the new jobs reported for May would have been 73,000. That’s still nowhere near previous months’ figures. But there was one bright spot.
The health care industry added 46,000 jobs last month. The most hiring occurred in ambulatory health care services (+24,000), hospitals (+17,000), and nursing care facilities (+5,000). Since May 2015 there have been 487,000 new health care jobs created.
But payrolls continued to decline in other sectors. Mining, which has been hit hard since the price of oil began to fall, lost another 10,000 jobs, down from a peak of 207,000 in September 2014. Durable goods, a subset of manufacturing, decreased by 18,000 jobs. And the construction industry also shed workers, decreasing payrolls by 15,000.
The growth in temp jobs, a figure some analysts consider a leading indicator of where the labor market is heading, fell to 0.6 percent year-over-year. That’s the lowest it’s been since 2010. Recruiters might actually have better insight into this number, though. Increasing temp jobs are thought to be a sign that employers are ready to hire more, but haven’t quite committed to new full time workers. On the flip side, when the number of temps declines, it can be a signal of lower demand for new workers, or even a need to make some cuts.
Who Isn’t Working?
If job gains in May were sparse, why did the unemployment rate fall? This figure only takes into account unemployed adults who have actively looked for work in the previous four weeks, which is not the easiest thing to track. It’s less likely that unemployment went down due to job gains, and much more likely that the drop came from more people not looking for work at all.
The labor force participation rate fell as well, indicating slightly fewer adults are either employed or actively seeking employment. So this had the knock on effect of pushing the unemployment rate down, too. The BLS actually tracks six different figures to measure unemployment, including one that counts “all persons marginally attached to the labor force, plus total employed part time for economic reasons as a percent of the civilian labor force.”
In May that figure was 9.7%, down from 10.7% a year ago. So taking into account adults who have stopped looking for work, and those who are underemployed in part time jobs, we see the number of U.S. adults who aren’t working is higher than that 4.7%. Recruiters should note that many candidates in this group may still want to find full time jobs, and could consider ways to target them within overall talent acquisition strategies.
Where Is the Jobs Market Heading?
As usual, the jobs report delivered some positive and negative news. But the first thing recruiters should always remember when they read these figures is that they’re not exact. Some studies have tried to quantify just how accurate, or not, the BLS data is. And some analysts view the report with a considerable margin of error at the back of their minds.
Much of the data comes from surveys, which just about anyone will know is unlikely to have a 100% response rate. Plus, there are normal phases in the business and economic cycle that come and go, impacting hiring, firing, and the job market overall. So the jobs report will always fluctuate to some degree, and there will always be a disparity between the data the BLS can collect and the real picture on the ground.
But that doesn’t mean the jobs report is useless. As we mentioned in the beginning, average hourly wages ticked up again. Recruiters might want to pay special attention to this part of the report. Increasing wages across the board is good for workers, but it also adds pressure on employers to keep up with the trend. If your competitors are starting to offer higher salaries, it may be time to review how your own compensation attracts and retains top talent.