May Jobs Report: Employment Exceeds Pre-Recession Peak, but Hold the Cheers...

By Diane Alter, Contributing Writer, Money Morning • June 6, 2014

The May jobs report had the potential to pass for decent, but then we looked at the labor force participation rate...

Employers added 217,000 jobs in May, leading the labor market to the milestone of recovering all the jobs lost at the depths of the Great Recession. The unemployment rate, meanwhile, remained flat at 6.3%, the U.S. Labor Department reported Friday. Both figures were in line with consensus forecasts of a 220,000 gain and an unchanged rate.

It's been a slow, painful, four-year grind recouping the 8.7 million jobs shed over 2007-2009. And, while the milestone is significant, U.S. employment is still well below where it should be after taking into account population growth and the labor force since the recession.

Indeed, the closely watched labor force participation rate, an important measure for the overall health of the economy, remained stuck at an unhealthy 62.8% last month. The rate has been floundering for months at lows not seen since the late 1970s. It's a sure sign that an increasing number of discouraged Americans have simply given up searching for jobs amid a very difficult job environment and have entirely dropped out of the work force.

Moreover, the economy still needs some 7 million more jobs to return to a healthy jobs growth pace, according to the Economic Policy Institute.

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This ongoing jobs recovery has been the most lengthy jobs recovery since 1939, when the Bureau of Labor Statistics began tracking jobs data. Economists surveyed by CNN Money expect it will take two to three more years for the United States to return to "full employment" of around 5.5%.

"The good news is the economy grew fast enough in May to absorb new labor force entrants," Steven Pressman, professor of economics and finance at Monmouth University in West Long Branch, N.J., told Money Morning. "The bad news is that we still have to make up for a half dozen years of recession and slow growth. Over time, the economy has not created enough jobs for normal labor force growth, as reflected in labor force participation numbers. While labor force participation remained steady in May at 62.8%, it's still well below the 66% pre-recession level."

So what does this mean for the Fed's bond-buying program?

The report is likely to keep the U.S. Federal Reserve on track to complete its monthly bond-buying program this autumn.

"The economy still has a long way to go to fully recover from the Great Recession," Pressman continued. "It's not clear where this recovery will come from. The Fed continues to slowly phase out QE3, and the government continues to be a drag on the economy and labor market amid spending and hiring cuts. As we move into summer, it's unclear whether the private sector will continue to absorb laid-off government workers and new job entrants in sufficient numbers."

Following are 10 key takeaways from Friday's report...

Closer Look at the May Jobs Reports

• A common trend over the last several months has been solid job gains in low-wage industries. Hotels, restaurants, and entertainment companies added 39,000 jobs in May. Retailers gained 12,500. Headcount in education, and health and services, climbed by 63,000.

• Construction payrolls rose by 5,000, marking the fifth consecutive months of gains. But, the pace is slowing.

• Government payrolls increased a tepid 1,000. Scores of state and local governments, which sharply cut jobs during the recession amid budget deficits, have yet to bring headcount back to pre-December 2007 levels.

• Boosted by hiring at vehicle assembly plants, payrolls at factories increased 10,000. Thanks goes to robust auto sales, up 11% in May to a nine-year high. A good part of the increase reflected pent-up demand after a harsh winter kept car buyers at bay. It's yet to be determined if that frenzy will continue and manufacturing jobs will continue to grow.

• Employment at private services providers rose 198,000.

• The average workweek remained steady at 34.5 hours.

• Average hourly earnings rose a paltry $0.05 to $24.38 in May, another indication that the labor market is still anemic. "A booming labor market would mean greater demand for workers, leading to increases in wages and increases in hours worked by those with jobs," Pressman said. "We're not seeing that and workers are not seeing greater purchasing power or living standards." Indeed, hourly earnings are up a modest 2.1% year over year. Over the last six and a half years, the average private sector American worker has seen a total inflation pay increase of just 2.5%, or a meager $20 a week.

• The number of Americans unemployed for longer than 27 weeks - a key figure Federal Reserve Chair Janet Yellen has made clear she wants to lower - was little changed at an elevated 3.4 million, or 35% of the unemployed.

• The underemployment rate, which includes workers stuck in part-time jobs although they'd prefer full-time work, as well as people who want to work but have given up looking, ticked down to 12.2% from 12.3%. Yet, a whopping 7.3 million people fall into this category.

• Last month's surprisingly strong jobs tally was revised down to 282,000 from 288,000.

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Related Articles:

• CNN Money:
  Finally! Job Market Returns to 2008 Peak
• Fox Business News:
  U.S. Adds 217,000 Jobs in May, Unemployment Stays at 6.3%
• Bloomberg:
  U.S. Payrolls Rose 217,000 in May, Unemployment at 6.3%, Nearly a 6-Year Low