Editor’s note: Dr. Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University and is a frequent contributor to WRAL TechWire. The following analysis was provided to TechWire following a request for his take on the news.
RALEIGH – The headlines of the May unemployment report indicates the economy was robust, and indeed, the numbers suggest that. Payroll numbers blew past expectations with 339,000 jobs added. Most sectors gained, with two exceptions being manufacturing and information. Government jobs had a big gain. But average weekly hours worked had a slight dip, and hourly wages rose at an annual rate of 4%, still less than the latest year-over-year inflation rate of 4.9%.
The separate survey of household employment raises some additional questions. Individuals holding multiple jobs rose by 200,000. The number of people saying they are working fell by 310,000. And due to the reduction in employment and growth in the labor force, the unemployment rate jumped from 3.4% to 3.7%.
There is always some confusion when the two separate job surveys go in different directions. Here’s my interpretation.
Businesses are still adding jobs at a good clip. But households are still showing stress. The challenging economy is motivating an increase in people holding more than one job. And, wage rate expansion is not keeping up with inflation, so standards-of-living are not rising. Hence, the business side of the economy is looking upbeat, but the worker side is still lagging.
This mixed – in my opinion – labor market report puts more emphasis on the next inflation report in a couple of weeks. Will the Fed put more focus on the payroll report and read an economy that is still too strong for their taste – consequently raising interest rates again? Or, will they recognize the economy at the worker level is still challenging, and therefore pause their rate hikes?
I’m sure Fed Chairman Jerome Powell and his colleagues are already asking these questions, and will look for answers in the May inflation report.