Weekly Economic Review: May’s Employment Report Weaker Than Expected

Posted by Laine Smith on 6/6/17 8:00 AM

Topics: Economy

In this week’s economic review, the unemployment rate dropped due to lack of participation in the labor market, home prices continue to rise at a strong pace, and mortgage rates fell to a 2017 low.

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The Job Market

ADP’s Employment Report predicted on Thursday that strength in employment gains resumed in May, calling for a 253,000 gain in private payroll growth, but Friday’s jobs report was weaker than expected.

Nonfarm payrolls grew by just 138,000, which was nearly 50,000 below expectations. Both April and March were revised downward, as well. Average hourly earnings didn’t make any strides in May, up only 0.2 percent in the month. April’s average hourly earnings were revised down 0.1 percent with the year-over-year rate sitting at just +2.5 percent.

Participation, which fell 2-tenths to 62.7 percent, is another negative in the report. The drop in participation pulled the unemployment rate down to 4.3 percent.

Home Prices

Home prices continue to be a highlight for the 2017 economy. According to Case-Shiller’s adjusted 20-city index, prices increased a very strong 0.9 percent in March. Unadjusted, the index is up 5.9 percent year-over-year.

Consumer Confidence

Consumer confidence is still holding at incredibly strong levels, according to the May consumer confidence report. The index did drop 1.5 points to a level of 117.9 from April’s adjusted reading, but May marks the sixth straight month the index has held over a reading of 110.

Most notably, the “job-hard-to-get” component dropped 1.2 percentage points to a low level of 18.2 percent, marking a new expansion best.

Pending Home Sales

Following suit with last week’s disappointing home sales data, pending home sales for April were also down, falling 1.3 percent lower for the month. The index is 3.3 percent lower than a year ago and points to weakness in May and June’s sales reports.

This week in the economy:

  • The 30-year fixed-rate decreased as of June 1st, landing at 3.94% with 0.5 points, according to Freddie Mac.
  • Purchase applications fell a seasonally adjusted 1 percent in the week of May 26, making it the third week of declines, and refinance applications fell 0.7 percent from the previous week after climbing 11 percent, according to MBA Mortgage Applications.
  • Initial jobless claims edged 13,000 higher in the week of May 27, according to Bloomberg, due to the holiday-shortened week and several states reporting estimates. Stay tuned for revisions next week.

The economic calendar for the week of June 5th, 2017:

  • Monday – Gallup US Consumer Spending Measure, Labor Market Conditions Index
  • Tuesday – JOLTS
  • Wednesday – MBA Mortgage Applications, Gallup U.S. Job Creation Index
  • Thursday – Jobless Claims, Bloomberg Consumer Comfort Index

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