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Payrolls in May rose a net 139,000, 13,000 above expectations – but the two prior months were revised lower by a combined 95,000. The other confusing part was the big drop in both the household survey and the size of the labor force, along with a participation rate reduction.

Specifically, there was a large decline of 696,000 jobs in the household survey. But this data point really jumps around as it followed a gain of 461,000 in April and 201,000 in March, plus a drop of 588,000 in February. As this matched the 625,000-person decline in the labor force, the unemployment rate held at 4.2% for a third straight month.

Source: Trading Economics

Helping to explain the big drop in the labor force was that the participation rate fell to 62.4% from 62.6%. That matches the lowest since December 2022. The participation rate for the key 25-54 year-old age cohort also fell two tenths month-over-month to 83.4%, but that was after rising by three tenths last month.

Private education/health continues to be the main driver of job growth, contributing 87,000 jobs and more than half of the 145,000 service sector jobs added. Leisure and hospitality added 48,000, so these two groups contributed to most of the service sector gains. Little job growth was seen elsewhere. Some 20,000 temp jobs were lost, as were 22,000 federal government jobs post-DOGE.

Bottom line: Including the downward revision, the job gains were softer than expected. But the private sector figures are still being reported much higher than ADP – and I believe it’s because of the birth/death overstatement taking place right now. On the other hand, the wage data was pretty good and the workweek held at 34.3 hours.

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