Skip to main content

The Employment Situation, May

Nonfarm payrolls fell for the fifth consecutive month in May, coming in at a slightly smaller-than-expected loss of 49,000. Along with the downward revisions for March and April (a total of 15,000), this figure brings the year-to-date monthly average loss in payroll employment to 65,000. The last time payrolls shrank for five consecutive months was in mid-2003. The Bureau of Labor Statistics (BLS) also reported today that the unemployment rate shot up from 5.0 percent to 5.5 percent, its sharpest increase in 22 years.

Average Nonfarm Employment Change

The job declines were broad-based, spreading beyond the usual housing-related sectors that have exhibited consistently poor performance in recent months. The only major sectors to add jobs last month were education and health services (54,000), leisure and hospitality (12,000), and the government (17,000). The goods-producing sector lost a total of 57,000 jobs, continuing along its 14-month path of decline. Service-providing industries added a very modest 8,000 jobs, much lower than April's addition of 72,000.

Within the goods-producing sector, manufacturing lost 34,000 jobs and construction lost 26,000. Durable goods manufacturing as a whole shed 19,000 jobs, largely due to losses in wood products (8,400) and computer and electronic products (7,500). The most positive contribution came from transportation equipment, which added 7,200 jobs, largely because of jobs added in the motor vehicles and parts subsector. The only small positives within nondurable goods came from paper and paper products (500) and chemicals (900).

Table 1. Labor Market Conditions

Average monthly change (Thousands of employees, NAICS)
2005 2006 2007 YTD 2008 May 2008
Payroll Employment 211 175 91 -65 -45
Goods-producing 32 3 -38 -79 -57
Construction 35 13 -19 -42 -34
Heavy and civil engineering 4 3 -1 -6 -3
Residentiala 11 -2 -10 -28 -25.1
Nonresidentialb 4 7 1 -7 -5.2
Manufacturing -7 -14 -22 -41 -26
Durable goods 2 -4 -16 -30 -19
Service-providing 179 172 130 14 8
Retail trade 19 5 6 -30 -27.1
Financial activitiesc 14 9 -9 -4 -1
PBSd 56 46 26 -25 -29
Temporary help services 17 1 -7 -23 -29.6
Education and health services 36 39 44 51 54
Leisure and hospitality 23 32 29 13 12
Government 14 16 21 15 17
Local educational services 6 6 5 6 14.1
Average for period (percent)
Civilian unemployment rate 5.1 4.6 4.6 5.1 5.5
  1. Includes construction of residential buildings and residential specialty trade contractors.
  2. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
  3. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
  4. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
  5. Source: Bureau of Labor Statistics.

The Unemployment Rate

U.S. labor markets have not experienced an increase in the unemployment rate of 0.5 percentage point since February 1986. The decline in 1986 in fact did not happen during a recession, but most such sharp increases have been historically associated with an overall economic downturn. The primary reason behind the latest large uptick in the unemployment rate is labor force entry. The total number of workers in the labor force increased in May by 577,000. An additional 285,000 workers lost their jobs, which gave rise to an increase of more than 861,000 in the number of unemployed. However, one needs to be cautious when interpreting these monthly changes in household data, which are very volatile. One interesting feature of the household employment data in May was the unusually high increase in teenage unemployment. The unemployment rate of workers aged 16 to 19 increased from 15.4 percent in April to 18.7 percent in May. This increase of 3.3 percentage points has been the largest change observed since January 1948, when the series begins. Hence, this latest unusual uptick in the unemployment rate is partly due to an unusually high level of teenagers entering the labor force.

Private Sector Employment Growth

Upcoming EventsSEE ALL