Event:
The May Employment Situation, released today by the US Bureau of Labor Statistics (BLS), indicates that total nonfarm employment rose by +272,000 in May on a seasonally adjusted basis, while temporary help services employment declined by -14,100 jobs. The temporary agency penetration rate was 1.72% in May, down from a revised April rate of 1.73%. The national unemployment rate increased to 4.0%, from 3.9%.
Employment expanded in most industry groups. The group with the largest gain was again Health and social assistance, which added +83,500 jobs; followed by Professional services excluding temporary help, which added +47,100 jobs; and Government, which added +43,000 jobs. Employment was unchanged in the Information sector, while employment fell in the Natural resources and mining sector, which declined by -4,000; as well as the Temporary help services industry, which fell by -14,100.
BLS Revisions:
The change in total nonfarm payroll employment for March was revised down by 5,000, from +315,000 to +310,000, and the change for April was revised down by 10,000, from +175,000 to +165,000. With these revisions, employment in March and April combined is 15,000 lower than previously reported.
The change in temporary help services employment in March was revised up, from a decrease of -2,700 to a loss of -800, and the previously estimated April decline of -16,400 was revised up to a loss of -12,300. On net, temporary help services employment in April was +6,000 higher than previously reported.
SIA’s Perspective:
The US economy added +272,000 jobs in May, exceeding the +185,000 median forecast in both the Bloomberg and Reuters surveys of economists.
Overall labor force participation declined by 20 basis points, from 62.7% to 62.5% and the prime age (25-54) labor force participation rate increased by 10 basis points from 83.5% to 83.6%. The uptick in the unemployment rate is strange given the strength of employment growth, but a look beneath the surface suggests this was driven largely by increased labor force participation among teens (ages 16-19), and slower job-finding among young adults (ages 20-24).
Aggregate hours worked in manufacturing and aggregate overtime hours both essentially remained flat, and growth in nonsupervisory workers’ hours primarily unwound April’s decline. Overtime hours remain negative Y/Y, down -0.8%, similar to April’s -0.9% Y/Y but dramatically improved from the -5.8% averaged in Q1. Hours in transportation and warehousing advanced slightly, by +0.2% M/M and the sector has now posted two consecutive positive Y/Y comps, up +0.3% Y/Y in May, an acceleration from +0.1% in April. With the caveat that the BLS data for temporary help services largely reflect the industrial segment due its large share of headcount, while these data points suggest improvement, they again indicate ongoing weakness in demand for temporary help services – particularly as manufacturing overtime hours remain near their all-time, non-recessionary low.
We expect that a manufacturing rebound will provide a strong tailwind for BLS measurements of temporary help services and anticipate this sector firming up following interest rate cuts. Rate cuts should also assist the tech sector, providing support for IT staffing. However, while at the start of the year rate cuts were anticipated to begin in May, the ongoing strength of the overall labor market and persistence of inflationary pressures could mean US interest rate cuts may only begin late in the year, if at all in 2024.
With most economists projecting solid growth in the US economy this year (real GDP growth of 2% or higher), we are keeping our eyes open for signs of an eventual uptick in demand for temporary staffing.
Competitive pressures continue to increase but opportunities remain for those staffing firms that have developed a competitive advantage via either their technology, their service offerings, or both.
Members may download this month’s jobs report or access our new interactive tool (beta) below:
Monthly Employment Situation June 2024 – You do not have permission to view this object.
US Employment Situation (online interactive tool)