US labour market – poor results – not close to full employment

On June 6, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – May 2017 – which showed that total non-farm employment from the payroll survey rose by just 138,000 in May. While the payroll data confirms an on-going deterioration in job creation, an examination of the Labour Force Survey data presents an even worse picture. The official unemployment rate fell from 4.4 per cent to 4.3 per cent, the lowest rate since May 2001. But the fall in unemployment of some 195 thousand persons was not a sign of strength. Total employment fell by 233 thousand but was a smaller decline than experienced by the labour force (down 429 thousand) on the back of a fall in the participation rate (0.2 percentage points). In other words, hidden unemployment rose while official unemployment fell as workers gave up looking for work in the face of declining employment growth. The estimate of employment change from the Labour Force Survey was also positive (156 thousand net jobs added). There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. Which makes the claims by a number of analysts that the US jobs market is so strong that inflation is about to accelerate on the back of wages growth (which at present is largely non-existent). In other words, there are many assessments that the unemployment rate has reached the so-called NAIRU (Non-Accelerating Inflation Rate of Unemployment) below which accelerating inflation becomes inevitable. I doubt that assessment.

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