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Employment Situation  
Released On 6/5/2009 8:30:00 AM For May, 2009
PriorConsensusConsensus RangeActual
Nonfarm Payrolls - M/M change-539,000 -530,000 -625,000  to -495,000 -345,000 
Unemployment Rate - Level8.9 %9.2 %9.1 % to 9.4 %9.4 %
Average Hourly Earnings - M/M change0.1 %0.2 %0.1 % to 0.3 %0.1 %
Av Workweek - All Employees33.2 hrs33.2 hrs33.1 hrs to 33.3 hrs33.1 hrs

Payroll employment in May was unexpectedly and significantly less negative than in recent months. But the unemployment rate also was a sharply higher than projected. Nonfarm payroll employment in May fell only 345,000, following a decrease of 504,000 in April and a drop of 652,000 in March. The May drop-off was not as severe as the consensus forecast for a 530,000 decrease. April and March revisions were up a net 82,000. For the latest month, losses were widespread in both goods-producing and services-providing industries.

By major categories, goods-producing jobs fell 225,000 in May, led by a 156,000 drop in manufacturing employment with motor vehicles & parts down 30,000. Construction declined 59,000 while natural resources & mining decreased 10,000 in the latest month. Service-providing payrolls fell only 120,000 in May after dropping 230,000 the month before. The latest decline was led by a 51,000 decline in professional business services, a 30,000 fall in financial activities, and a 22,000 decrease in wholesale trade.

On a year-ago basis, payroll jobs were down 3.9 percent in May, compared to down 3.7 percent the month before.

Wage inflation remained very soft in May as average hourly earnings posted a 0.1 percent gain, matching the rise in April and coming in below the consensus forecast for a 0.2 percent rise. The average workweek edged down to 33.1 hours from 33.2 hours in April.

From the household survey, the civilian unemployment rate rose another five-tenths to 9.4 in May and came in above the market projection of 8.9 percent. The May rate is the highest since 9.5 percent last seen in August 1983. There is speculation that the spike in unemployment is largely due to college and high school graduates not being able to obtain employment and the difficulty in seasonally adjusting jobless numbers this time of year.

Adding credence to the view that the spike in the unemployment rate is a problem related to younger members of the labor force were age details in the rate. The unemployment rate for teenagers spiked 1.2 percentage points to 20.7 percent in May. The rates for adult men and for adult women rose 0.4 percentage points each to 9.8 percent and 7.5 percent, respectively.

Today's employment report is clearly a positive for equities with job losses easing and upward revisions to March and April. Wage inflation is benign, meaning the Fed is under less pressure to boost rates sooner than later. Stock futures rose on the news while bond yields increased.

Consensus Outlook
Nonfarm payroll employment fell a very steep 539,000 in April, following a 699,000 plunge in March. The good news was the contraction in jobs eased somewhat. The big question for the May employment report is whether the shrinkage in losses will continue. We saw deceleration in the pace of job cuts in February only to have it reversed in March. A second slowing in a row in payroll layoffs will be a boost to equities. On the wage front, average hourly earnings were very weak in April, rising only 0.1 percent and May's number likely will be sluggish, too. Turning to the household survey, the unemployment rate jumped 4 tenths to 8.9 percent in April. If this rate doesn't ratchet upward again in May, it will be a big surprise as it is hard to find an economist not calling for further increases in the unemployment rate for some time.

The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.

Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.

The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.  Why Investors Care
During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month.
Data Source: Haver Analytics
The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy.
Data Source: Haver Analytics

2009 Release Schedule
Released On: 1/92/63/64/35/86/57/28/79/410/211/612/4
Release For: DecJanFebMarAprMayJunJulAugSepOctNov

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