By Megan Horneman. © Verdence Capital Advisors
- May employment data falls below high expectations
- Long-term unemployment drops
- Manufacturing jobs rebound
- Workers impacted by COVID return to work
Last week’s unemployment report was below the consensus’s high expectations but showed promising signs for the labor market. Data distortions will be a common theme while we face COVID aftermath, requiring further dissection into major reports to see what is improving. In the employment report, there are several positive signs about the progress in the labor market to highlight.
- Long-term unemployment: The number of Americans that have been unemployed for more than 27 weeks dropped by 431k in May. This is the largest drop seen since October 2011, when the labor market finally recovered from the Great Recession of 2009. In addition, the unemployment rate dropped one full percentage point.
- Manufacturing jobs: In May, manufacturing jobs were added to help the decline from the month prior. There was also a 32k drop in manufacturing payrolls. The drop was not consistent with the employment component in the ISM Manufacturing Index and is the area of the economy that needs workers to clear up supply constraints.
- Hourly earnings solid: The average hourly earnings component of the employment report rose 0.5% in May after a 0.7% (MoM) jump in April. This can be attributed back to companies raising wages or giving one-time incentives that are successfully getting employees back to work.
- Labor force participation rate improving in areas: In May, there were two positive improvements for the disproportion of women in the workforce as schools were closed. Since last August, the overall labor force participation rate for women over 16 and the rate for women maintaining families rose to new highs.
The Bottom Line:
There is still a long road ahead before recovering all jobs lost during the pandemic. Even though the employment report did not meet its expectations, it was not bad. The labor market rarely bounces back quickly after a recession, especially after one like the COVID recession. This summer we will see half of the states in the U.S. no longer accept additional Federal benefits. This will give us insight into whether or not the unemployment benefits were a factor in keeping workers from returning.
This material was prepared by Verdence Capital Advisors, LLC (“VCA”). VCA believes the information and data in this document were obtained from sources considered reliable and correct and cannot guarantee either their accuracy or completeness. VCA has not independently verified third-party sourced information and data. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. These projections, market outlooks or estimates are subject to change without notice. This material is being provided for informational purposes only and is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.
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By Megan Horneman