On Friday, we got a look at how the labor market did in May. After jobs growth stuttered in the first quarter, investors were looking for reassurance that the economy can still support hiring. Here are three good things and two not-so-good things that we learned: - The economy created 280,000 new jobs in May, beating expectations and leaving economists feeling optimistic about growth this quarter.[2]
- The unemployment rate ticked upward to 5.5%, but that's mostly a result of an increase in the number of people looking for jobs. A higher labor force participation rate is a good sign because it means people are feeling confident enough in job opportunities to go looking, so we'll count this one as a positive.[3]
- Lagging wage growth, which has concerned economists, appears to be reversing with U.S. workers adding $0.08/hour to their paychecks last month. Wage growth over the last three months is much closer to the 3.0% we've seen in past economic recoveries.[4] Since economic growth depends heavily on consumer spending, we can hope that bigger paychecks will translate into a greater willingness to spend.
- In the not-so-great category, we learned that the majority of the new jobs created were in low-paying industries like retail, hospitality, temp work, home health services, etc.[5] Though we're seeing an uptick in full-time work, many Americans are still struggling to find good-paying jobs, which may limit their ability to qualify for a mortgage and make big-ticket purchases.
- Productivity, measured in output per worker hour, registered a dismal 0.3% increase last month. Productivity is a major factor in long-term economic growth, and low labor productivity could be a warning sign. Is it cause for worry?
Probably not. Productivity is often tied to wages - higher wages have been seen to boost worker productivity - so we can hope that wage increases will boost output. There are also some economists who argue that the way productivity is estimated doesn't account for technological improvements and shifts in the ways Americans work today.[6]
Looking ahead, investors will be watching Greek debt negotiations closely to see whether creditors will bow to hardline Greek demands for loans without austerity measures, or whether they will allow debt-laden Greece to slide into default. We'll also get a look at the latest retail sales and business inventories data, which will show us how consumers and businesses are spending this quarter.
ECONOMIC CALENDAR: Tuesday: JOLTS
Wednesday: EIA Petroleum Status Report, Treasury Budget
Thursday: Jobless Claims, Retail Sales, Import and Export Prices, Business Inventories
Friday: PPI-FD, Consumer Sentiment
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