May Employment Report

The headlines from the May employment report are that the unemployment rate rose to 7.6% while the economy added 175,000 jobs (178,000 in the private sector).  But what about the underlying details?  Nothing that dramatic.  The broad measure of unemployment (U6) declined to 13.8% while the labor force participation rate rose to 63.4% (from a 34-year low of 63.3%).  Aggregate hours worked, which had declined in April, rose in May.  All of these numbers are mildly positive.  Where was the job growth?  Food services and drinking places added 38,100 jobs, retail trade added 27,700 and temp agencies added 25,600.  Together, these three sectors represent about 20% of all jobs, but more than half of net job creation in May (and April); they are also relatively low-paying sectors of the economy.  That is one reason why average hourly earnings were flat this month.

What else can we learn from this report?  Since May 2012, the unemployment rate has declined from 8.2% to 7.6%.  However, the unemployment rate rose for teenagers as well as those in their early 20s while the largest declines occurred for those above the age of 55 and those between 25 and 34.  As can be seen in the chart below, the unemployment rate is inversely related to age:

Age	Unemployment Rate
16-19	24.5%
20-24	13.2%
25-34	7.2%
35-44	6.2%
45-54	5.9%
55+	5.3%

What's the key takeaway from the report?  The job market continues to heal at a modest rate, with disproportionate employment growth in relatively low-paying occupations.