May's Jobs Report Leaves Critics Very Little to Gripe About

Poke holes in whatever you might see as the downside of Friday morning's look at last month's job creation and employment report. Just know that you're grasping at straws if you do so. This is one of the best reports we've seen in years, and some of the ones we've seen since mid-2017 have been pretty darn good.

Beginning with what you likely already know, the United States employment machine created 223,000 new jobs last month, pushing the unemployment rate down to 3.8%. Both were better than expected, and that's the lowest unemployment rate we've seen in years.

Too good to be true? Just some fortunate mathematics? Nope. The impressive numbers were the real deal. The number of people with jobs grew to a record 155.474 million, and the number of people (officially) without jobs sunk to a multi-year low of 6.065 million.

The one curiosity here, in terms of headcounts? The number of people who are not employed but not counted as unemployed yet interested in getting a job ticked higher to 5.183 million. There are a couple of legitimate, not-problematic explanations though. That is, a swath of college graduates are just starting to look for work, and a great number of people who had been on the sidelines are seeing job opportunities surface and are only now acting on the interest (seeing their peers land jobs).

Regardless, the 5.2 million people who want a job, don't have one, but aren't getting unemployment benefits either may have edged a little higher, but it's still not a problem. The bigger trend is still pointed downward.

Along those same lines, though the employed/population ratio moved a little higher to 60.4% - extending a broad uptrend by doing so - the labor force participation rate slumped again to 62.7%.

This has been something of a nagging nuisance for a while now, further politicized as evidence of one President's or the other's failings. Realistically speaking though, the fact that every other facet or measure of the job market is improving, the fact that the labor force participation rate isn't budging (at least not meaningfully) verifies that the Baby Boomers are indeed bowing out of the job market, and they're fine with simply enjoying their retirement.

The degree to which the Baby Boomer effect has crimped the labor force participation rate has been difficult to quantify, though that hasn't prevented some observers from doing it anyway. Don't get bogged down by those guesses. The best we can do is understand that this is the 'new normal' for the labor force participation rate... and will be for a while. The employed/population ration means a great deal more.

Last but not least, though the graphic below doesn't plot the updated data as of May, it does indicate that hourly wages have rekindled an uptrend that got started in late 2014. In fact, if the wage data from May were available to add to our chart, it would indicate that the average hourly wage now stands at a record-breaking $10.88-ish per hour, up about 2.3% year-over-year. And, unlike what we saw in 2016 and 2017, work hours weren't cut to offset the per-hour pay progress.

This is a big deal, not because one month can make or break the market or jump start the economy, but because May's numbers top off a long string of forward progress that has already surpassed most expectations. It's this kind of sustained growth that allows the economic engine to achieve real escape velocity and then become self-sustaining.

That doesn't necessarily mean the market is immune to pullbacks. In the short run, the market's going to do what the market's going to do, pushed and pulled by headlines. For the long-term, earnings-driven undertow though, Friday's snapshot further solidified an already-impressive jobs picture.