US labour market improvement on track
Simon Ward
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Friday's US employment numbers for May were reported as being disappointing because of a smaller-than-expected gain in private-sector payrolls. A revival in private employment incomes is a necessary component of a sustainable economic recovery.
The reaction, however, looks exaggerated, for three reasons. First, the small May rise followed strong gains in March and April, so the three-month increase remains solid at 0.4%, or 1.6% annualised.
Secondly, employees worked longer hours on average in May, compensating for the smaller jobs increase. Aggregate private-sector hours have risen by an unusually-strong 1.3%, or 5.4% annualised, over the last three months – see first chart.
Thirdly, an alternative measure of private-sector employee jobs derived from the monthly household survey shows a stronger recent gain – second chart. This measure is more volatile but may be a better indicator around turning points in the cycle, partly because it should pick up trends in smaller firms that are underrepresented in the payrolls survey.
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