May Jobs Report Was One of the Strongest Ever

Last Friday’s unemployment report for May was a barn burner, much stronger than most anyone in the forecasting business expected. It included numerous record-breaking statistics for the economy — that the mainstream media conveniently overlooked. So today, let’s take a closer look at the latest jobs report and what it suggests for the economy.

Here are the basics: businesses added 223,000 new jobs last month versus 190,000 expected. That pushed the official unemployment rate down to 3.75%, matching the lowest rate ever set in 1969, according to the Labor Department. Job gains for March and April were also revised higher by 15,000. It doesn’t get much better than that.

Well, in this case, it does. The unemployment rate for African-Americans fell to 5.9% in May from 6.6% in April. The May number is the lowest unemployment rate for African-Americans in history. Hispanics, too, are doing better under President Trump’s tax cuts and deregulation policies. Their unemployment rate in May was 4.9%, very near the all-time low of 4.8% in April.

And the good news doesn’t stop there. Several other demographic groups left behind in previous economic recoveries are doing much better this time around. For example, those lacking a high school diploma – long considered economic dead-enders – saw their unemployment rate drop from 5.9% to 5.4%.

For those with a high school diploma, the unemployment rate dropped from 4.3% to 3.9%. If you lack a bachelor’s degree but spent some time in college, your jobless rate dropped from 3.5% to 3.2%.

In short, you almost have to try not to have a job these days. And it’s happening in a broad swath of industries: education, health care, retailing, restaurants, hotels, manufacturing, construction — you name it.

Looking at a separate household measure of jobs, a different statistic kept by the government, there were 128.66 million full-time jobs in the US in May. That’s a 904,000-job increase in one month, the largest jump in the data’s history. All told, 155.47 million Americans have jobs, a new record.

How about wages? Average hourly compensation rose to $26.92 last month, up 2.7% from a year ago. While that’s slower than most forecasters would expect at this stage in the economic recovery, there are solid reasons to believe wage growth will accelerate in the second half of this year.

The bottom line is that Friday’s jobs report was one of the strongest ever – even if the mainstream media won’t admit it. The US economy is gaining momentum.

Consumer Spending Surges Most in Five Months

US consumer spending increased more than expected in April (latest data available), a further sign that economic growth was regaining momentum early in the 2Q. The Commerce Department reported last week that consumer spending, which accounts for more than two-thirds of US economic activity, jumped 0.6% in April, the biggest gain in five months.

The pre-report consensus was for a gain of 0.4%. Data for March was revised up to show spending rising 0.5% instead of the previously reported 0.4% increase.

Consumer spending hit another new record high in the 1Q of this year, hitting $1,206 billion ($1.206 trillion), up from $1,203 billion in the 4Q of last year.

Spending in April was boosted by purchases of gasoline and other energy products, which have risen in price this year. Nondurable goods purchases increased a solid 0.9%. Outlays on services rose 0.5%, lifted in part by rising demand for household utilities.

Prices for most goods and services continued to gradually rise in April. The Personal Consumption Expenditures Price Index (PCE), excluding the volatile food and energy components, increased 0.2% for the third straight month.

That left the year-on-year increase in the so-called core PCE Price Index at 1.8%. The core PCE Index is the Federal Reserve’s preferred inflation measure. The US central bank has a 2% core PCE inflation target.

Economists expect the annual core PCE Price Index will reach the Fed’s target in the coming months. The Fed is expected to raise interest rates next week at its June policy meeting which concludes next Wednesday. It increased the Fed Funds rate in March and has forecast at least two more rate hikes for this year.

The solid consumer spending in April added to positive data on trade and industrial production that have economists anticipating a pickup in economic growth in the 2Q. Gross Domestic Product estimates for the April-June period are now above a 3.0% rate, with some well above 4%. The economy grew at a 2.2% pace in the 1Q.

It remains to be seen if the economy can grow above 3% for the year, but I’m optimistic.