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Pre-Markets Down on Goldilocks Jobs Numbers: 390K, 3.6%

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Friday, June 3, 2022

New non-farm payrolls are out for the month of May this morning — it’s the monthly Employment Situation from the U.S. Bureau of Labor Statistics (BLS). Results were about as good across the board as one could expect: 390K new jobs were created last month, while the Unemployment Rate remained steady at 3.6%.

The headline number was a nice increase above the 330K expected, although revisions to the previous two months give back a few: while April gained 8000 jobs from the initial headline to 436K, March gave up 30K to 398K. It marks the first time in 10 months we saw headline BLS jobs beneath 400K — an historically robust period for the labor market.

Average Hourly Earnings for May grew at a +0.3% rate, in-line with the previous month but moderating a bit when we trace back over this strong period in the workforce. Year over year, this comes in at +5.2%, marking five straight months above 5% on earnings growth. In this metric, we’re fairly Goldilocks — not too hot, not too cold — because labor costs have been a major impediment to business growth, especially small businesses, so some evening out here takes the sting away, while also helping employees keep a level of purchasing power.

Labor Force Participation ticked up to 62.3% — still off the pre-Covid high 63.4% in February 2020, and not growing at a rate many analysts were looking for. The U-6 (aka “real employment”) rate reached 7.1% for the month, off the March low 6.9%, but still historically solid. Workweek hours came in at 34.6 for the month. The overall labor market brought in 30K new Americans to the workforce in May. While cooling from the past year’s jobs gains, we’re still in a very healthy era for employment.

When we breakdown by industry, we see some normal results and at least one that’s rather abnormal: Leisure and Hospitality led the way with 84K new positions filled, followed by Professional and Business Services at 75K and Transportation/Warehousing at 47K. But Retail lost -61K jobs in the month — a big hit to the sector that may reflect on industry demand.

Pre-market activity at first treated these numbers kindly, but have since given way to session lows: prior to the BLS release, the Dow was -150 points, the S&P 500 was -30 and the Nasdaq -150; ahead of the opening bell, we’ve slipped to -235 points, -42 points and -195 points, respectively. Clearly, we’re giving back some of yesterday’s rather generous gains, and perhaps last week’s +6% accumulation. Call it “Sell the News Friday.”

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