Event: The May Employment Situation, released today by the US Bureau of Labor Statistics (BLS), indicates that total nonfarm employment rose by +339,000 in May on a seasonally adjusted basis, while temporary help services employment increased by 7,700 jobs. The temporary agency penetration rate was 1.95% in May, steady with an upwardly revised April figure. The national unemployment rate increased to 3.7% from 3.4% in April, and the labor force participation rate remained at 62.6%.

Employment expanded in most industry groups. The group with the largest gain was Health and social assistance, which added +74,600 jobs; followed by Professional services (excluding temporary help), which added +56,300 jobs; and Government, which added +56,000 jobs. Employment declined in two sectors. Employment in Information fell by -9,000, and employment in Manufacturing fell by -2,000.

BLS Revisions:

The change in total nonfarm payroll employment for March was revised up by 52,000, from +165,000 to +217,000, and the change for April was revised up by 41,000, from +253,000 to +294,000. With these revisions, employment in March and April combined is 93,000 higher than previously reported.

The change in temporary help services employment in March was revised up from a -18,900 loss to a loss of -3,300, and the previously estimated loss of -23,300 in April was revised up to a loss of -6,900. With these revisions, temporary help services employment in April was +32,000 higher than previously reported.

SIA’s Perspective: 

The US economy added +339,000 jobs in May, again significantly higher than the median forecast in a Bloomberg survey of economists, which called for a gain of +195,000. Actual nonfarm payroll growth has exceeded forecasts for fourteen consecutive months. However, the trend in employment growth remains deceleration. In 2021, average monthly payroll growth was +605,600; in 2022, it was +399,400; and for 2023 through May, that figure is +314,000.

The unemployment rate remains historically low, but its monthly change from April to May was large at 0.3%. Similarly, the Household Survey and the Establishment Survey diverged in May, with employers reporting +339,000 new workers on their payrolls but individuals reporting job losses, with the Household Survey indicating employment fell by -310,000. Divergence between the Household and Establishment surveys, and a large month-on-month increase in the unemployment rate are both consistent with prior business cycle turning points, but we caution against reading too much into these developments, as the survey divergence can also reflect differences in definitions and concepts between the surveys. Specifically, self-employment is captured in the Household Survey, and reported unincorporated self-employment declined by -412,000 alongside an increase of +302,000 in incorporated self-employment, suggesting movement out of informal and gig work into formal and traditional employment.

The labor force participation rate remains at 62.6%, its highest rate since the onset of the pandemic but below its the 63.3% rate seen at the end of 2019 and early 2020. The prime age labor force participation rate (those in the prime of their working years, ages 25 through 54, being largely done with their education and too young to retire) grew again in May, to 83.4% from 83.3% in April, though the prime age the employment-to-population ratio declined from 80.8%to 80.7%, still near its all-time high. Labor scarcity remains a challenge.

For temporary help services, May saw a welcomed return of growth, with employment up 7,700 from April. This is the first monthly growth in temporary help employment since January. Temporary help employment remains elevated against its entire pre-pandemic history, and the industry is maintaining a high plateau. Even a plateau in the staffing industry implies continuing and large opportunities for those staffing firms that have developed a competitive advantage via either their technology, their service offerings, or both.

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