The U.S. economy added 280,000 jobs in May, according to the Bureau of Labor Statistics’ latest report, an encouraging sign that the weaker jobs growth seen early this year was a passing problem, not a permanent downshift for the economy. The labor-force-participation rate ticked up one-tenth of a percent, to 62.9 percent, explaining why the unemployment rate rose, too, to 5.5 percent. It’s best if the participation rate is rising steadily, of course, but considering demographic headwinds, it’s an encouraging sign if it just stops dropping.
Still, this level of jobs growth is not spectacular, and wages are only just now beginning to look like they might grow steadily. If 2014 was the top speed for this recovery, there’s not much to celebrate.
When jobs growth earlier this year was weaker than 2014 had been — January saw 201,000 jobs added, February rebounded a bit, but then March added just 119,000 jobs — there was concern over whether this was due to an economy-wide slowdown or weakness in just a few isolated jobs categories, including oil jobs (because of low oil prices) and manufacturing (thanks to the strong dollar).
Since the economy appears to have shrunk a bit in the first quarter, there was some real underlying weakness. But jobs growth is back even though the weak industries haven’t recovered. Oil continues to hurt: Mining, the job category that includes oil-and-gas extraction, shed another 17,000 jobs in May. And another sector that contributed to 2015’s weaker numbers, manufacturing, also hasn’t quite recovered: It added just 7,000 jobs in May, which is noticeably slower than the sector has grown throughout the recovery.
There was also a bit of good news about wages, which have generally been really bad news. Average hourly wages have grown about 2 percent annually during the recovery, just barely outpacing inflation. but May saw slightly stronger growth, at 0.3 percent in just this month alone. Economist Justin Wolfers notes the good news:
All told, it looks like average rates of wage growth have risen from "a bit more than 2%" to "a touch under 3%".
— Justin Wolfers (@JustinWolfers) June 5, 2015
The pickup can be seen in this chart from Deutsche Bank, released this morning (via Business Insider). It could just be a blip, but it could be some very good news:
The return to strong jobs growth will also raise questions about how soon the Federal Reserve plans to lift interest rates from near zero — the Open Market Committee, which makes these decisions, meets in the middle of this month, and could theoretically raise rates, or hint that it will do so later this year if the solid growth keeps up. If the growth stays like this, rates are generally expected to rise in September, although many monetary-policy observers argue they should perhaps stay lower for a good bit longer. International Monetary Fund head Christine Lagarde, for instance, said yesterday she’d like the Fed to keep rates around zero through 2016 because her organization predicts weaker growth expected from the U.S. That, however, was before we got today’s news.