Mixed Signals in Latest Jobs Report

By at 7 June, 2024, 12:15 pm

by Raymond J. Keating –

The latest employment report from the U.S. Bureau of Labor Statistics served up some mixed numbers.

The headline number was fine. That is, the BLS establishment survey pointed to nonfarm payroll employment increasing by a solid 272,000 in May.

However, the report’s household survey – a more comprehensive measure that better captures startup and small business activity, while also being more volatile month-to-month – told a very troubling story. According to this survey, employment dropped by a whopping 408,000 in May, with the labor force also declining by 250,000. Also, those not in the labor force increased by 433,000.

The labor force participation rate slipped from 62.7 percent in April to 62.5 percent in May. To put that in some perspective, this rate registered 63.3 percent in pre-pandemic February 2020, and 66.4 percent in January 2007.

Meanwhile, the employment-population ratio also declined slightly from 60.2 percent in April to 60.1 percent in May. Again, for some perspective, this ratio came in at 61.1 percent in February 2020 and 63.4 percent in December 2006.

This data from the household survey raises additional questions about where the economy is headed in the near term.

However, one important positive on the employment front is the fact that the employment-population ratio among those in the prime working ages of 25-54 years old registered 80.8 percent in May, which was unchanged from April. It also exceeded the 80.5 percent in February 2020 and the 80.3 percent in January 2007.

Comparing these 25-to-54-years-old percentages to those for the overall adult population also speaks to the aging of the U.S. population. Note in the following chart the stagnation in growth of 25-54 year olds since late 2007.


Source: Federal Reserve Bank of St. Louis, FRED

This aging factor ties into an ongoing labor shortage as time passes absent notable increases in immigration, for example. In turn, that will drive increased innovation and automation (at least in the near term), higher labor costs, and diminished entrepreneurship. That last point on entrepreneurship eventually will be a negative feedback on innovation.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.


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