Though an increase of 431,000 jobs in May might seem like good news on the surface, May’s employment report was disastrous and sent stock futures plunging, S&P futures almost instantaneously falling from down about 2 points to over 20 points down. Why? The consensus among forecasters was that 540,000 jobs would be added, with about 425,000 being temporary census workers, leaving a growth in private sector employment of over 100,000.
That’s not what happened. Almost all of the job growth was census workers. Private sector employment grew only 41,000. And if you look into the details, the news is even worse. The total employment level actually fell by 35,000 workers. (See column “E” in the following spreadsheet.) The administration had to fall back on the excuse that people dropped out of the labor force in order to show a decline in unemployment. Here’s the calculation, followed by charts:
What’s disastrous about this report is that, following some job growth in the early part of the year, all indications are that growth has stalled and may actually be headed back into decline. Weekly jobless claims have held steady at unacceptably high levels. Other private measures of employment, job growth and layoffs show that the labor market is stalled. Continued economic recovery hinges on job growth, and now a double-dip recession looks more likely.