138,000 new jobs were added to establishment payrolls in the month of May. This figure was noticeably below the consensus forecast of 185,000. May was the 80th consecutive month of positive employment growth going back to October 2010; it is currently the longest advance in history. 15.7 million jobs were created during this expansion period, sending the unemployment rate from 10 percent to 4.3 percent now.
Some are questioning if May’s weaker than expected employment gain is foreboding. For context, I’ve graphed solely the month of May’s historical job gains and losses since 2007. As indicated by the graph, last May the economy added 43,000 jobs; today’s figure doesn’t look too bad in comparison.
Financial markets have enriched investors during this stretch, but how much longer can the stock market continue its ascent without meaningful fiscal stimulus from Washington? On a yearly basis, 2017 appears to be on a downward trajectory. There have been 774,000 new hires added to employers’ payrolls over the first five months. On an annualized basis, job growth looks to be in the 1.8 million range for the entire year. The Federal Reserve projections call for a longer-run normal unemployment rate between 4.5% and 5.0%; it is presently at 4.3%.
The Fed’s congressional mandate is to foster full employment and maintain price stability. 4.3 percent unemployment is well within the Fed’s mandate and inflation looks subdued. Which begs the question, will the Fed raise rates in June or wait until later?