NFP Report: Unemployment Leaps to 5.5%

chart via BLS


The U.S. lost jobs for the fifth
consecutive month, as nonfarm payroll employment continued to trend down. For May 2008, -49,000. Unemployment rose by 861,000 to 8.5 million, jumping half a percent to 5.5% — the sharpest one month gain in 22 33 years. One year earlier, the jobless rate was 4.5%.

U-6, the broadest measure of Unemployment, jumped to 9.7%.

The Household survey showed employment fell by 285,000 while unemployment rose by 861,000 by the most in more than two
decades. Bloomberg described this as "signaling that the world’s largest economy is stalling."

Other noteworthy data points:

-The average workweek was unchanged at 33.7
-Average hourly earnings rose by 5 cents, or 0.3 percent, and up just 3.5% from a year earlier;
-Birth/Death model added 217k to the employed (not monthly) total  vs 174k in May ’07. (meaning, expect further revisions lower in the future)
-BLS B/D estimated an add of  42k construction jobs, 9k financial jobs — hard to believe in the current environment;
-Previous month revisions were lower by 15k;
-Unemployment rate jumped to 0.4% more than expected;
-The labor force rose, as reentrants (326,000) and new entrants (204,000) added to the labor force in May.

Expect the recent "no recession" consensus to come under additional pressure in the coming weeks. . .


June 6, 2008



CES Net Birth/Death Model

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What's been said:

Discussions found on the web:
  1. Douglas Watts commented on Jun 6

    Five months in a row does not make a trend.

  2. commented on Jun 6

    No need to worry. It’s a Goldilocks Economy…

  3. UrbanDigs commented on Jun 6

    Barry – Does the B/D adjustment work like a seasonal adjustment in the sense that what comes in will come out over the course of the year?

    I want to know if in future months the B/D adjustment will actually HURT future NFP reports in coming months, just like it artificially helped it over the past 5 months?

    I know inflation data starting next month will show effects of all this commodity inflation

  4. SINGER commented on Jun 6

    Those construction jobs are REAL!!!

    The workers were needed to construct custom display cases for the “Most Off-Point Economic Series” awards received by Macroeconomic Advisors for their ADP Employment Report…

    Financial jobs were added as staff was hired to facilitate the movement of the “Display Case” transaction “off balance sheet”

  5. mikkel commented on Jun 6

    UrbanDigs: I don’t believe so. The post right under this one comments “The data released up to the third quarter of 2007 suggest that private nonfarm payrolls could be revised down by 500,000 when the next benchmarking of payrolls takes place early next year.” I believe it is not a gradual correction, but a one time revision.

  6. John commented on Jun 6

    Another prop under the Kudlow fiction cracks and snaps. This one is going to long, slow and ugly just as Uncle Warren keeps telling us.

  7. ScottB commented on Jun 6

    I spoke with the folks at BLS about the birth/death model a couple of months ago. They have put together an analysis of how the model is working, which was then in the review process. It should be out shortly. The analysis uses the Business Employment Dynamics database as a measure of births and deaths. Should be interesting. And yes, the data underlying the BED is what is used to revise the initial estimates of nonfarm. The revision happens once a year at the national level. The state of Washington revises on a quarterly basis, which BLS could do as well–the data is available. Why wait a whole year?

  8. VennData commented on Jun 6

    Why wait a whole year? Because they election will be over by then, and they’ll have have new jobs on Wall Street ‘interpreting’ the B/D model etc.

  9. Paul in NYC commented on Jun 6

    Layoffs have finally hit my architecture firm- hard.
    This is worrisome since we have an international client list, but the practical effects of the credit crisis are finally being felt here.

  10. UrbanDigs commented on Jun 6

    Paul – sorry to hear. I just never really bought into the foreign demand BS and thought it was overhyped since the credit crisis began last summer. Confidence trumps any currency trade, and foreigners are notoriously late to the party anyway.

    Not to deny the presence of foreign demand on residential side, which is there, just not to the extent that many would have you believe. Nobody wants a depreciating asset.

    I think this market has been very soft for 5-6 months now. But price data will remain strong for residential until all new dev inventory closes and the $1400+/sft deals get picked up in data. Existing resales price/volume data will show you the true market right now.

  11. wunsacon commented on Jun 6

    Douglas Watts, LMAO!

  12. Jay commented on Jun 6

    I think Michael Darda called +20k and a definite rally yesterday on Fast Money. Oops…

  13. grumpyoldvet commented on Jun 6

    Barry……where do all the construction jobs that states use in spring thru fall highway repair appear….if they are considered “construction” could this be one of the reasons why we have not seen a drastic drop in that number???

  14. The Big Picture commented on Jun 7

    More on May 2008 Employment

    As a follow up to our NFP extravaganza yesterday, here are a few additional items you may find informative: Yesterday, we noted the big jump in Unemployment (a historic outlier) and wondered aloud whether it might be attributed to, in large part, a sea…

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