The unemployment report for May had little weakness, further evidence that the recent Harris poll results—in which 55 percent of those surveyed believed the US is in a recession—didn’t reflect reality.
In fact, total nonfarm payroll employment increased by 272,000 in May, higher than the average monthly gain of 232,000 over the prior 12 months. The unemployment rate rose to 4.0 percent from 3.9 percent, slightly higher than the pre-pandemic levels of 3.5 percent when the average inflation rate was under 2 percent, as portrayed in the truncated FRED graph below (gray line is 2020 pandemic recession) that many seem to remember so fondly .
More jobs were added to payrolls in almost all sectors. Health-care providers added 68,000 jobs last month, hotel, restaurants and other leisure companies hired 42,00 new workers, and government employment rose by 42,000.
It’s more evidence, in my opinion, of a collective amnesia that several historians have maintained. Many Americans don’t want to remember the horrors of one million dead from COVID-19; and haven’t been able to move on in one of the greatest economic recoveries since the Great Depression.
It’s the main reason government employment has risen for state and local jurisdictions as well where most of the infrastructure modernization is taking place.
There were some signs of a weakening labor market. A survey of households showed a 408,000 decline in the number of people who said they were employed, the biggest drop since the end of 2023. The size of the labor force also shrank by 250,000 for the first time in four months. That explains why the jobless rate hit 4 percent after 27 straight months below that number.
But that doesn’t explain the Harris results, whereas prices remaining high and inflation still hovering in the 3 percent might. No one likes rising prices that boost the cost of everything, and the shock of the sudden rise in prices after the pandemic had to be almost as traumatic as the pandemic itself.
But it was mostly due to the worldwide shutdown of supply chains. Long Beach, California once had more than 50 container ships waiting offshore to unload their cargo that totaled as much as $2 trillion in value during the shutdown. That’s a lot of goods that couldn’t get to markets, a supply shortage that is the major reason for the price shocks. So the Harris poll may be measuring the effects of that emotional shock.
What else can explain its divergence from how the US economy is behaving in the post pandemic recovery with its record job creation? More Americans are working than ever.
Professional, scientific, and technical services added 32,000 jobs in May, higher than the average monthly gain of 19,000 over the prior 12 months, said the report. Employment increased in management, scientific, and technical consulting services (+14,000) and in architectural, engineering, and related services (+10,000). Specialized design services lost 3,000 jobs.
To repeat, the Harris poll said:
· 55% believe the economy is shrinking, and 56% think the US is experiencing a recession, though the broadest measure of the economy, gross domestic product (GDP), has been growing.
· 49% believe the S&P 500 stock market index is down for the year, though the index went up about 24% in 2023 and is up more than 12% this year.
· 49% believe that unemployment is at a 50-year high, though the unemployment rate has been under 4%, a near 50-year low.
"What Americans are saying in this data is: ‘Economists may say things are getting better, but we're not feeling it where I live,'” said John Gerzema, CEO of the Harris Poll. “Unwinding four years of uncertainty takes time. Leaders have to understand this and bring the public along.”
What will it take for more Americans to accept the fact that the US economy is doing very well and more Americans are working then ever? It probably doesn’t help that this very divisive presidential campaign is just now heating up.
Harlan Green © 2024
Harlan Green on Twitter: https://twitter.com/HarlanGreen
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