May’s jobs report, construction spending, factory inventories and JOLTS

Last week’s major economic releases included both of the major monthly employment reports: the Employment Situation Summary for May and the Job Openings and Labor Turnover Survey (JOLTS) for April, both from the Bureau of Labor Statistics, in addition to the April report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for April, with both of those from the Census Bureau.…in addition, late on Friday the Fed released the Consumer Credit Report for April, which showed that overall consumer credit, a measure of non-real estate personal debt, expanded by a seasonally adjusted $20.7 billion, or at a 4.8% annual rate, as non-revolving credit expanded at a 2.9% rate to $3,804.4 billion while revolving credit outstanding grew at a 10.4% rate to $1,348.7 billion……

Privately issued reports released last week included the ADP Employment Report for May, wherein the national payroll processor reported a 122,000 increase in private jobs in May, the light vehicle sales report for May from Wards Automotive, which estimated that vehicles sold at a 15.5 million annual rate in May, down from the 15.9 million annual rate of sales in April, and down from the 15.65 million annual sales rate of May a year ago, and both of the widely followed purchasing manager’s surveys for May from the Institute for Supply Management (ISM): the May Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 54.0% in May, up from 52.7% in April and its highest level since May 2022, which means that a larger plurality of manufacturing industry purchasing managers nationally reported improvement in various facets of their business in May, while the May Services Report On Business saw the ISM Services index rise from a reading of 51.6% in April to a reading 54.5% in May, which likewise means that a larger plurality of service industry purchasing managers nationally reported improvement in various facets of their business in during the month..

Employers Added 172,000 Jobs in May; Employment Rate Rose 0.1%, Unemployment Rate Unchanged

The Employment Situation Summary for May indicated that payroll job growth was above expectations, that the employment rate rose 0.1%, and that the labor force participation rate and the unemployment rate were unchanged from April…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 172,000 jobs in May, after the previously estimated payroll job increase for March was revised up from 185,000 to 214,000, and the payroll jobs increase for April was revised up from 115,000 to 179,000 jobs…with those revisions, that means that this report indicates an increase of 265,000 jobs from those reported last month, far more than the 96,000 job increase that was expected….the unadjusted data shows that there were actually 741,000 more payroll jobs extant in May than in April, as excessive seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were washed out of the reported total by the seasonal adjustment algorithm…

Seasonally adjusted job increases in May were spread through the private goods-producing and services sector and government, with only jobs in financial activities showing a notable decrease…. since the BLS summary of the job gains by sector is clear and usually as detailed as our usual synopsis, we’ll just quote from that summary here:

• Total nonfarm payroll employment increased by 172,000 in May, similar to the gain of 179,000 in April. In May, job gains occurred in leisure and hospitality, local government, and health care. Employment in financial activities declined. (See table B-1.)
• Leisure and hospitality added 70,000 jobs in May, well above the average monthly gain of 14,000 over the prior 12 months. Over the month, food services and drinking places added 48,000 jobs.
• In May, employment in local government rose by 55,000, largely reflecting a gain in local government, excluding education (+44,000).
• Health care added 35,000 jobs in May, in line with the average monthly gain of 38,000 over the prior 12 months. Over the month, ambulatory health care services added 26,000 jobs, including a gain of 11,000 in home health care services. Employment continued to trend up in hospitals (+6,000).
• Social assistance employment continued to trend up in May (+12,000), mostly in individual and family services (+10,000). Over the prior 12 months, social assistance had added an average of 17,000 jobs per month.
• Employment in mining, quarrying, and oil and gas extraction increased by 5,000 in May and is up by 10,000 since February.
• Financial activities employment declined by 22,000 in May and is down by 107,000 since a recent peak in May 2025. Over the month, job losses occurred in insurance carriers and related activities (-11,000) and commercial banking (-3,000).
• Employment in transportation and warehousing was essentially unchanged in May (+1,000) but is down by 92,000 since reaching a peak in February 2025. Over the month, transit and ground passenger transportation (+9,000) and warehousing and storage (+6,000) added jobs. Air transportation lost 9,000 jobs, largely reflecting a business closure.
• Employment showed little change over the month in other major industries, including construction, manufacturing, wholesale trade, retail trade, information, professional and business services, and other services.

The establishment survey also showed that average hourly pay for all employees rose by 12 cents an hour to $37.53 an hour in May, after it had increased by an unrevised 6 cents an hour in April; at the same time, the average hourly earnings of production and non-supervisory employees increased by 8 cents to $32.31 an hour….employers also reported that the average workweek for all private payroll employees was unchanged at 34.3 hours in May, while hours for production and non-supervisory personnel remained at an average of 33.8 hours…in a subset of that, the manufacturing workweek was unchanged at 40.4 hours, while average factory overtime edged up to 3.1 hours…

Meanwhile, the seasonally adjusted extrapolation from the May household survey estimated indicated that the number of those who were employed rose by an estimated 149,000 to 162,771,000, while the similarly estimated number of those who were unemployed fell by 66,000 to 7,307,000; which thus meant there was a rounded net increase of 83,000 in the total labor force…since the working age population had grown by 99,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 17,000 to 104,976,000, the highest on record…. meanwhile, the increase of those in the labor force as a percentage of the increasing working age population was not enough to change the labor force participation rate, which remained at 61.8% in May, which was still down from 62.4% a year earlier….however, the increase in the number employed vis a vis the increasing population was enough to raise the employment to population ratio, which we could think of as an employment rate, from 59.1% in April to 59.2% in May, which was also down from 59.7% a year earlier…meanwhile, the decrease in those counted as unemployed vis a vis the total labor force was not enough to lower the unemployment rate, as it remained at 4.3% in May…at the same time, the number who reported they were involuntarily working part time fell by 137,000 to 4,805,000 in May, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 8.2% in April to  8.1% of the labor force in May…

Like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there…note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it alongside the press release to avoid the need to scroll up and down the page..

Job Openings Rose Sharply in April; Hiring, Layoffs and Job Quitting were all Lower

The Job Openings and Labor Turnover Survey (JOLTS) report for April from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 731,000, from 6,887,000 in March to 7,618,000 job openings in April, after March’s job openings were revised 21,000 higher, from the originally reported 6,866,000 to 6,887,000 …April’s jobs openings were also up by 7.3% from the 7,619,000 job openings reported for April a year ago, as the job opening ratio expressed as a percentage of the employed rose from 4.2% in March to 4.6% in April, and was also up from 4.3% a year ago…since the employment report indicated there were 7,373,000 unemployed during April, that means there were 1.03 job openings for each person who reported they were unable to find work during the month….the greatest increase in April job openings was in the professional and business services sector, where openings rose by 668,000 to 1,715,000, while job openings in finance and insurance fell by 135,000 to 300,000… (details on job openings by industry and region can be viewed in Table 1)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked to at the end of the release…

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in April, seasonally adjusted new hires totaled 5,116,000, down by 419,000 from the revised 5,535,000 who were hired or rehired in March, as the hiring rate as a percentage of all those employed fell from 3.5% in March to 3.2% in April, and was also down from the 3.4% hiring rate of April a year earlier (details of hiring by industry since January are in table 2)….meanwhile, total separations were also lower, falling by 399,000, from 5,377,000 in March to 4,978,000 in April, as the separations rate as a percentage of the employed fell from 3.4% in March to 3.1% in April,  which was also down from the 3.3% separations rate in April a year ago (see table 3)…subtracting the 4,978,000 total separations from the total hires of 5,116,000 would imply an increase of 138,000 jobs in April, somewhat less than the revised payroll job increase of 179,000 for April reported by the May establishment survey we reviewed above, but still with the expected +/-110,000 margin of error in these incomplete extrapolations…

Breaking down the seasonally adjusted job separations, the BLS found that 2,977,000 of us voluntarily quit our jobs in April, down by 183,000 from the revised 3,160,000 who quit their jobs in March, while the quits rate, widely watched as an indicator of worker confidence, fell to 1.9% in April from 2.0% in March, which was also down from the quits rate of 2.0% a year earlier (see quits details in table 4)….in addition to those who quit, 1,692,000 of us were either laid off, fired or otherwise discharged in April, down by 192,000 from the revised 1,884,000 who were discharged in March, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was equal to the 1.1% discharges rate of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 310,000 in April, down from 333,000 in March, for an ‘other separations’ rate of 0.2%, the same rate as in March and as in April a year ago….both seasonally adjusted and the unadjusted details by industry and by region on hires and job separations, and on job quits and discharges, can be easily accessed using the links to tables at the bottom of the press release…..

Construction Spending Rose 0.4% in April after February and March Figures were Revised Lower

The Census Bureau’s report on construction spending for April (pdf) estimated that the month’s seasonally adjusted construction spending was at a $2,172.4 billion annual rate during the month, up 0.4 percent (±0.7 percent)* from the revised March annual spending rate of $2,162.0 billion, but 0.5 percent (±1.2 percent)* below the estimated annualized level of construction spending in April of last year…the annualized March construction spending estimate was revised almost 1.0% lower, from $2,185.5 billion to $2,164.5 billion, while the annual rate of construction spending for February was revised 0.6% lower, from $2,173.2 billion to $2,160.7 billion…taken together, the $33.5 billion annualized downward revisions to February and March would suggest an downward revision of $11.2 billion to first quarter construction spending on a annualized basis (ie, one-third of cumulative monthly annualized figures equals a quarterly annualized rate), which would in turn subtract 0.18 percentage points, give or take, from 1st quarter GDP when the third estimate is released at the end of June…

A further breakdown of the different subsets of construction spending are provided by a Census summary, which precedes the detailed spreadsheets, and is included below:

• Private Construction -Spending on private construction was at a seasonally adjusted annual rate of $1,639.7 billion, 0.4 percent (±0.5 percent)* above the revised March estimate of $1,633.9 billion. Residential construction was at a seasonally adjusted annual rate of $909.9 billion in April, 0.8 percent (±1.3 percent)* above the revised March estimate of $902.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $729.8 billion in April, 0.2 percent (±0.5 percent)* below the revised March estimate of $731.0 billion.
• Public Construction - In April, the estimated seasonally adjusted annual rate of public construction spending was $532.7 billion, 0.4 percent (±1.3 percent)* above the revised March estimate of $530.6 billion. Educational construction was at a seasonally adjusted annual rate of $113.7 billion, 0.6 percent (±1.6 percent)* above the revised March estimate of $113.0 billion. Highway construction was at a seasonally adjusted annual rate of $149.6 billion, 0.4 percent (±4.4 percent)* above the revised March estimate of $149.0 billion.

This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and as government investment outlays, for both state and local and Federal governments…however, getting an accurate read on the impact of April’s construction spending reported in this release on 2nd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…there are many different price indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf) that are used by the BEA to make those inflation adjustments, so in lieu of trying to adjust for price changes for all of those types of construction separately the way the BEA will do, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an estimate…that index showed that aggregate construction costs were down by 0.1% from March to April, up by 0.1% from February to March and up by 0.1% from January to February….

On that basis, we can estimate that April’s construction costs were roughly the same as those of February and 0.1% more than those of January, and 0.1% less than those of March….we then use those crude percentage differences to adjust spending for each of those three months, which is arithmetically the same as inflating April construction spending against the first quarter, for comparison purposes….annualized construction spending in millions of dollars for the first quarter months is given as 2,164,474 for March, 2,160,663  for February, and 2,178,092 for January….thus to compare April’s annualized construction spending of $2,172,397 million to our ‘inflation adjusted’ figures of the first quarter, our calculation is: 2,172,397 / (( 2,164,474 * 0.999 + 2,160,663 * 1.000 + 2,178,092 * 1.001) / 3) = 1.002144835, which means that real construction in April was up roughly 0.2144835% vis a vis the 1st quarter, or up at a 0.86% annual rate….to estimate the potential effect of that change on 2nd quarter GDP, we take the annualized difference between the first quarter average inflation adjusted construction spending and April’s spending as a fraction of the annualized 1st quarter GDP figure, and find from that estimate that real April construction spending was rising at a rate that would add about 0.15 percentage points to the growth rate of 2nd quarter GDP, in the unlikely event that May and June’s inflation adjusted construction is virtually unchanged from that of April…

Factory Shipments Rose 1.0% in April, Factory Inventories Rose 0.3%

The April Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $30.1 billion or 4.8 percent to $662.7 billion in April, the fifth increase in six months, following an increase of 1.8% to $632.7 billion in March, which was originally reported as a 1.5 percent increase to $630.4 billion last month….However, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, and uses non-durables shipments data in its place instead, we believe that this month’s “new orders” and “unfilled orders” sections of this report are really only useful as a revised update to the April advance report on durable goods we reported on a week ago… for those durable goods orders revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we’ll just quote directly from that summary here:

• Summary: New orders for manufactured goods in April, up five of the last six months, increased $30.1 billion or 4.8 percent to $662.7 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent March increase. Shipments, up six of the last seven months, increased $6.3 billion or 1.0 percent to $641.0 billion. This followed a 1.5 percent March increase. Unfilled orders, up twenty-one of the last twenty-two months, increased $26.8 billion or 1.7 percent to $1,569.0 billion. This followed a 0.2 percent March increase. The unfilled orders-to-shipments ratio was 6.95, up from 6.88 in March. Inventories, up seven consecutive months, increased $2.4 billion or 0.3 percent to $959.1 billion. This followed a 0.7 percent March increase. The inventories-to-shipments ratio was 1.50, down from 1.51 in March.
• New Orders for manufactured durable goods in April, up two consecutive months, increased $25.7 billion or 8.0 percent to $346.2 billion, up from the previously published 7.9 percent increase. This followed a 1.3 percent March increase. Transportation equipment, also up two consecutive months, led the increase, $23.3 billion or 21.6 percent to $131.1 billion. New orders for manufactured nondurable goods increased $4.4 billion or 1.4 percent to $316.5 billion.
• Shipments of manufactured durable goods in April, up seven of the last eight months, increased $1.9 billion or 0.6 percent to $324.5 billion, up from the previously published 0.5 percent increase. This followed a 0.8 percent March increase. Transportation equipment, up six of the last seven months, led the increase, $0.9 billion or 0.8 percent to $107.8 billion. Shipments of manufactured nondurable goods, up five consecutive months, increased $4.4 billion or 1.4 percent to $316.5 billion. This followed a 2.3 percent March increase. Petroleum and coal products, up four consecutive months, led the increase, $2.5 billion or 4.0 percent to $64.7 billion.
• Unfilled orders for manufactured durable goods in April, up twenty-one of the last twenty-two months, increased $26.8 billion or 1.7 percent to $1,569.0 billion, unchanged from the previously published increase. This followed a 0.2 percent March increase. Transportation equipment, up eight of the last nine months, led the increase, $23.2 billion or 2.4 percent to $993.1 billion.
• Inventories of manufactured durable goods in April, up seven consecutive months, increased $1.7 billion or 0.3 percent to $598.9 billion, unchanged from the previously published increase. This followed a 0.3 percent March increase. Transportation equipment, up six of the last seven months, led the increase, $0.7 billion or 0.4 percent to $189.9 billion. Inventories of manufactured nondurable goods, up three consecutive months, increased $0.7 billion or 0.2 percent to $360.2 billion. This followed a 1.3 percent March increase. Chemical products, up following eight consecutive monthly decreases, led the increase, $0.3 billion or 0.2 percent to $129.2 billion.

To estimate the effect of those April factory inventories on 2nd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the total value of finished goods inventories was 0.4% lower at $324,433 million; the value of work in process inventories was 0.9% higher at $273,408 million, while the value of materials and supplies inventories was 0.3% higher at $361,284 million…the April producer price index reported that prices for finished good were on average 2.0% higher, that prices for intermediate processed goods were on average 2.7% higher, and that prices for unprocessed goods were 4.1% higher on a 11.3% jump in prices for crude oil….assuming similar valuations for like types of inventories, those prices would suggest that April’s real finished goods inventories were about 2.4% lower than those of March, that real inventories of intermediate processed goods were roughly 1.8% lower, and that real raw material inventory inventories were also sharply lower, even after the jump in the price of oil is pulled out…however, since real NIPA factory inventories were also quite a bit lower in the 1st quarter, accounting for all of the 1st quarter inventory drop after offsetting increased retail and wholesale inventories, and since this report also seems to indicate a sharp decrease in April’s real inventories, the impact of 2nd quarter factory inventories on the growth rate of 2nd quarter GDP will be determined by which quarter has the larger decrease…if it’s the first quarter, then the negative factory inventories in the 2nd quarter would still add to GDP, by an amount equal to the difference between the quarterly decreases..

(the above is the synopsis that accompanied my regular Sunday morning news links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most of which are chosen from the aforementioned GGO posts, contact me…)