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May jobs report: 390,000 jobs added, unemployment rate at 3.6%

Yahoo Finance Live anchors break down May jobs report data.

Video Transcript

- And Brian, it seems like you may have the results in just one second.

- Yeah, we're waiting for the numbers from the Bureau of Labor Statistics, again, covering the month of May. 390,000 jobs were added in the month of May. Again, that beats expectations from TheStreet of 318,000.

The unemployment rate coming in at 3.6%. That's a notch above where TheStreet had expected it at 3.5%. But keep in mind, that keeps in the pace of the 3.6% unemployment rate that we had seen in the prior month of April.

On the wage gains front, again, we've been talking about how important this is within the story of inflation, clocking in on a year-over-year basis average hourly earnings increasing by 5.2%. Knock on with what TheStreet had expected at 5.2%. That's a market slowdown, although still quite hot from the 5.5% year-over-year wage growth that we had seen in the month of April.

So overall, it seems like this report still kind of showing that the jobs market is continuing to add payrolls. Again, this is showing a healthy labor market. And again, for the Federal Reserve, they're probably taking solace in this. And they're probably not going to change the approach, which is still for perhaps 250 basis points moves in the next two meetings in June and July.

We'll see how markets react. But again, the big headline number, 390,000 jobs added in the month of May, 3.6% unemployment rate, and wage growth on a year-over-year basis, 5.2%.

- I can't help myself but to look at the initial reaction by the markets here in the pre-market, a slight tick down, but of course, many hours to dissect this report.

One number that stood out to me, guys, 810,000. That is a number of workers on temporary layoff. I would argue in a strong, or strengthened economy, you would see that number continue to come down. The fact that it was unchanged month-over-month perhaps feeds into this narrative of a slowing economy.

- One thing that I wanted to come back to, as well, labor force participation, it looks like we've got this new range-bound scenario right now, is it only ticked higher by about 1/10 of a percent. And so that really kind of sets us in this mindset of thinking about what that range is. And it looks like anywhere between 62.2 or 62.4 is going to be our new range.

As of right now, this reading for May came in at 62.3% for the participation rate in the labor force. And then, additionally, you've got to look at some of those sectors as well that we've been tracking also.

- Yeah, that's right. And just taking a look at some of those sectors, transportation and warehousing that we were just talking about, 47,000. We're looking at also, education and health services, 74, leisure and hospitality, 84. So leisure and hospitality still adding there to those jobs as well.

- Yeah, and looking at retail, retail down 61--

- Contracted. It actually contracted.

- Contracted. That is a red flag too, as well. But again, employment for March was revised down by 30,000. April, revised up by 8,000. You had a net reduction in jobs for March and April.

But you have to wonder, what should you place more stock in if you are an investor in this market here? Is it a report like this, or is it the warnings of a Jamie Dimon?

- The retail bit is interesting because, again, that's actually something that we have seen reflected by the commentary that we've been hearing from the likes of Walmart and Target which really triggered a lot of the big spill in markets that we saw about two weeks ago.

So again, you really want to be careful with retail numbers just because it's so seasonal. But again, these are the kind of seasonally adjusted figures that are showing a contraction of about 60,000 jobs between April and May.

So you are seeing some of a slimming down in the retail sector. Although, leisure and hospitality, which again remains the big story for just the overall employment situation because that was one of the more hard-hit sectors during the pandemic, they actually did grow quite substantially over the course of that month period, 84,000 jobs, I believe, added.

Professional services also getting a nice boost over the month, coming in pretty hot as well. But look, I want to point out just really quickly, 5.7 million, the amount of people not in the labor force who currently want a job. That's not changing.

So if you want to read into the tea leaves there, the turnover, and kind of the churn that we're seeing within the labor market, showing a little bit of signs of perhaps getting a little bit more solidified in the month of May.

- And as you're watching the markets closely every day, what could be one takeaway from a report like this? You have Microsoft coming out this week warning in a big way. You have corporate layoffs. You have profit margins really under pressure because of various inflationary pressures. I would argue that this report is backward looking and maybe you place more stock in a Jamie Dimon.

- That's exactly my point as well. It's a lagging indicator in my view because you are hearing from these CEOs. I mean, Tesla CEO Elon Musk talking about a bad feeling about the economy.

So when you are hearing those comments from CEOs, from Jamie Dimon, about a hurricane when it comes to the economy, you have to kind of weigh that with these lagging indicators on employment.

- If I could just add really quickly, I think one thing to emphasize here is that these reports are going to, arguably, not be as important to the Fed as they continue to hike rates. And the reason why is because the Fed, as they start to kind of continue to raise short-term interest rates, that's not necessarily going to lead to a large tick up in the unemployment rate is what the Fed is hoping for.

What they want to see is job hires take down postings, not to start firing people, which means that the amount of postings that we're seeing in those JOLTS reports might actually be a better guiding star for the Fed than the overall employment situation.

- Good luck getting that perfect scenario.