Monthly job creation took a surprise leap in May as U.S. businesses added 272,000 new non-farm positions last month, far outpacing the 190,000 expected by economists and providing further fodder for the U.S. Federal Reserve to extend its long-running pause on making any move to reduce its benchmark interest rates.
While the unexpected surge pushed the monthly new job average so far this year to 248,000, similar to the monthly average that ran throughout 2023, U.S. unemployment ticked up from 3.9% in April to 4% in May, a rate not seen since early 2022.
The Friday report from the Labor Department’s Bureau of Labor Statistics shows industry sectors leading the U.S. jobs market in May include health care, adding 68,000 positions last month, open government positions growing by 43,000, and leisure and hospitality industries adding 42,000 to employment rolls.
Average wages for U.S. workers also saw growth in May, up .4% from April and 4.1% over the past 12 months, per the report.
According to the latest state-level data, Utah had an unemployment rate of 2.8% in April, among the lowest in the country. North Dakota and South Dakota tied for nation-leading low unemployment in April at 2.0%.
The job and unemployment figures in Friday’s report aren’t likely to accelerate the Fed’s move toward a reduction to its overnight lending rate window of 5.25% to 5.5%, a range that’s stood unchanged since last summer.
“One step forward, two steps back. Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut,” Seema Shah, chief global strategist at Principal Asset Management, told CNBC. “Not only has jobs growth exploded again, but wage growth has also surprised to the upside, both moving in the opposite direction to what the Fed needs to begin easing policy.”
Jobs report explained
The federal report’s disparity between monthly numbers that reflect robust job growth numbers alongside an increase in the unemployment level is not all that unusual and tracks back to the data gathering methods behind those two figures.
The Labor Department uses two monthly surveys to assemble its jobs report. One, the household survey, measures labor force status, including unemployment, by demographic characteristics. The establishment survey measures non-farm employment, hours and earnings by industry.
Per a breakdown of the methodology behind the jobs data by The Wall Street Journal, the establishment survey gathers information from about 119,000 businesses and government agencies to determine monthly job creation numbers. The household survey checks in with a rotating group of around 60,000 households to calculate the national monthly unemployment rate.
The Journal reports the data in the two surveys never matches up exactly and some of the differences track back to the lists of information each report is seeking. For example, one survey includes farm jobs information while the other does not.
So, what do the latest numbers mean for Utah’s economy?
In a Friday Deseret News interview, Phil Dean, senior economist for the University of Utah’s Kem C. Gardner Policy Institute, said Utah’s labor market remains robust, though there has been some softening in a few sectors. But Dean said those changes are on the back of an unprecedented run of overall economic growth and prosperity for the Beehive State and a little slowing may not be a bad thing.
“Overall, we’re continuing to do well as a state,” Dean said. “We’re definitely seeing moderation compared to where we’ve been over the past several years. Some of that is healthy after a period of growing at breakneck speed.
“But we don’t want moderation to turn into decline. Right now, we’re trending toward more moderate growth.”
Dean said he’s keeping a close eye on where any slowdowns in Utah’s jobs market are occurring. While he expects to see declines in industries that are interest rate-sensitive, and that has been happening in some areas of Utah business including the financial sector and tech industries, the bigger concern is if those job declines move into the broader state economy.
Dean noted a particular highlight in Utah’s labor market is showing up in the construction industry, which was at a 5.4% job growth rate in April, the latest available state data. That figure is up significantly from last fall, when job growth for the state’s construction businesses was hovering around 1.5%. The positive momentum in an area that tends toward being very sensitive to interest rate fluctuation is a great indicator, Dean said.
“It’s pretty remarkable to me given all the challenges that are out there,” Dean said. “I think it signals strength and a high level of confidence on the trajectory of where things are going in Utah.”