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Hiring Slows in 5 out of 8 Sectors

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The May jobs report was widely regarded as strong. The US economy added 390,000 jobs, according to the latest data. But a deeper dive into that data reveals that the labor market might not be as strong as the mainstream spin is leading you to believe. Even with all the new jobs, hiring slowed in five out of eight sectors.

While the April number was revised up by 6k jobs, March fell by 30k. The unemployment rate stayed flat at 3.6% for the third month. The Labor Force Participation rate increased from 62.2% to 62.3%. YoY, this May is down 57k jobs compared to last May.

Figure: 1 Change by sector

Looking at the raw numbers, the MoM fall is 250k and down about 140k when compared to last year.

Figure: 2 Monthly Non-Seasonally Adjusted

Comparing the adjusted data to non-adjusted shows that this May saw the smallest adjustment down since May 2010 (black line) except for the Covid adjustment in 2020. The spike down in 2020 is tied into the massive job gains seen in the initial rebound from Covid. The gross adjustment was over 500k which is larger than the recent adjustment of 420k.

This has been a theme so far in 2022 as the adjustments down have been smaller than in recent years. The impact of Covid has clearly caused the models to adjust the seasonality of employment. It will be interesting to see how this plays out in the second half of the year and if the BLS will have to make major late-year adjustments as it did last year.

Figure: 3 YoY Adjusted vs Non-Adjusted

Breaking Down the Adjusted Numbers

Looking at the raw numbers is interesting and shows how much the BLS models modify the final output. That being said, the market at large and this analysis will focus primarily on the officially published numbers.

The chart below compares the current month with the 12-month average. Five of eight categories are below the 12-month trend. The government sector showed the biggest beat compared to the 12-month average followed by Education/Health and then Construction. Considering the slowdown in housing, it’s likely construction will fall below the 12-month trend later this year.

Figure: 4 Current vs TTM

The table below shows a detailed breakdown of the numbers. Similar to the 12-month trend, the current month is below the 3-month trend as well. The 12-month average is 545k jobs vs a 3-month average of 408k. It is clear that the job market is slowing as the Covid recovery wears off.

Of particular interest is that the job market has averaged only 27k jobs per month over 3 years. This is a very low average and shows how much Covid impacted the job market. A healthy job market will average 200k jobs a month, or more than 7x more!

Key takeaways:

  • Federal and State governments were well above their 3- and 12-month averages
  • Trade/Transport/Utilities collapsed to 1,000, which is well below the 92.8k 12-month average
  • Professional Business was slightly above the 3-month average
  • Manufacturing was well below the 3 and 12-month average

Figure: 5 Labor Market Detail


Revisions have come down a lot after massive revisions over the last year few months. From Feb-Apr, jobs have been revised up by an average of only 3,700 per month. In the analysis two months ago, this figure stood at 166k per month. The 12-month average revision is 72.8k which means the current 3-month period is 5% of the 12-month period.

Figure: 6 Revisions

Historical Perspective

The chart below shows data going back to 1955. As the labor force has grown in total aggregate numbers, the recessions along the way have caused dips in the general trend. But the trend is still clearly upward.

The Covid recession can be seen as the greatest job market loss. The chart also shows how the rebound has been quite strong. The job market had 152.5M people pre Covid and now sits at 151.7M. The job market is still 800k people short. This does not include the jobs that would have been created if not for Covid.

Figure: 7 Historical Labor Market

The distribution of the workforce has changed significantly over the last 65+ years. For example, in 1955, manufacturing accounted for 30% of jobs vs 8.4% today. Education/Health Care has tripled from 5% to 16%.

Although the unemployment rate has been sharply falling over the last year (chart above), the labor force participation (62.3%) is still below pre-pandemic levels (63.4%) and much lower than the 66% pre-financial crisis.

Figure: 8 Labor Market Distribution

What it means for Gold and Silver

The job market does appear to be slowing, but the number today did surprise to the upside. The weak ADP report yesterday led many to think the job report today would be much weaker than it was. The smaller adjustments down are something to watch going forward. It is not surprising that March was revised down by almost 30k jobs given the minimal adjustments occurring in real-time.

Gold and silver followed the market lower today. A stronger-than-expected job market could keep the Fed on a pace for more tightening despite preliminary talk of a potential pause in September. In the short term, anything could happen. But the Fed is running out of room to keep talking without acting. Two 50bps hikes are on the table for June and July. These could easily pop the bubble economy, but if not this summer, it will happen. There is simply too much debt for interest rates to move much higher without doing serious damage.

Employment tends to be a lagging indicator. However, tech companies are already doing layoffs at the fastest pace in two years. This will likely spread to other sectors once a recession sets in. Then what is the Fed going to do? Will Powell be the Fed chair who let inflation wreck the economy or the Fed chair who caused the greatest recession in modern history? It could be both, but it certainly won’t be neither.

Data Source: and also series CIVPART

Data Updated: Monthly on first Friday of the month

Last Updated: May 2022

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