An hour ago we got the May US Employment report and the headline Nonfarm Payrolls print of just 69,000 vs. 150,000 was bad enough on its own, but the uptick in the Unemployment Rate of 0.1pp to 8.2% added to the negative sentiment. However, without coming off as too optimistic, this report was not as bad as the payrolls print(s) suggests and the market reaction indicates.
A report of two halves
The first half of the report, which concerns the so-called Establishment survey, was clearly bad to put it mildly. Nonfarm Payrolls rose just 69,000 – the smallest monthly increase since exactly 12 months ago in May 2011 – and the revisions were also poor at -49,000 (April in particular was hit hard: 77,000 from 115,000 earlier). In addition, Private Payrolls were poor (82,000 vs. 164,000 expected) and Hourly Earnings (0.1% m/m vs. 0.2% expected and 0.1% prior revised from 0%) and Weekly Hours (34.4 vs. 34.5 expected and prior) were negative.
Household survey much better than the Unemployment Rate suggests
Another, less scrutinised (except for the single Unemployment Rate number), part of the report is the Household Survey, which showed that employment rose by a massive 422,000. Yes you read that right. So the reason for the increase in the Unemployment Rate was that the Participation Rate rose to 63.8% from 63.6% previously. Of the 642,000 entering the labour force 422,000 gained employment.
This is not to say that the report did not disappoint, it clearly did from a Nonfarm Payrolls (or Establishment survey) point in view, but the other half was much better and tends to lead. Overall, the report confirms the sense of slowing economic growth in the US and adds to the rounds of ammunition of those who favour more stimulus (quantitative easing)
Mads Koefoed
SAXO BANK
