Boockvar on Jobs
From Peter Boockvar:
Job gains well ahead of expectations
Payrolls in May rose by 172k, well more than the estimate of up 88k and the two prior months were revised up by a total of 93k. A major factor at play was the 55k person increase in local government hiring. Also helping was the 70k hiring increase in leisure/hospitality vs the average monthly increase of 14k over the prior 12 months. Healthcare, again, the other major contributor, added 35k jobs, about in line with the average of 38k over the prior year.
Elsewhere, the hiring was more mixed. Jobs were lost in retail, financial services and information. Professional/business services, the sector that saw the huge jump in job openings in April, added 6k jobs vs 22k in the month before. On the goods side, manufacturing added 7k people and construction hired a net 17k, both most likely tied to the AI buildout.
The household survey said 149k jobs were new but which follows three months in a row of declines totaling 475k. The labor force grew by 83k and which combined, kept the unemployment rate unchanged at 4.3%. The all in U6 rate at 8.1% was down one tenth m/o/m.
The participation rate held at 61.8%, the lowest since September 2021 but continued to be weighed down by retiring boomers. The participation rate for the 25-54 yr old group rose one tenth to 83.9%, just one tenth below from matching the highest since 2001. Hours worked remained at 34.3 while average hourly earnings grew by .3% m/o/m as expected and by 3.4% y/o/y. Combining the two saw weekly earnings higher by .3% m/o/m and 3.7% y/o/y.
Measuring the breadth of hiring is seen in the diffusion index and it ticked up to 54.4 from 54 and which compares with 54.2 in January 2020. That’s the highest since December 2024.
Bottom line, the data center construction, along with the demand for healthcare workers and leisure/hospitality drove most of the job gains. Because of the local government hiring pop, I’ll do the monthly averages with just the private sector. The 3 month average is 166k vs the 6 month average of 87k and the 12 month average of 56k. Thus, a clear pick up over the past few months and why interest rates are jumping in response with the 10 yr yield back above 4.50% and the 30 yr above 5.00%. The 2 yr yield is having the biggest move, jumping 10 bps to 4.14%. While I don’t think the fed funds futures are that relevant in pricing in rate moves until we hear from Kevin Warsh in a few weeks, it is currently pricing in an 88% chance of one rate hike by yr end.
25-54 yr old Participation Rate
Diffusion Index
Positions: None.
