Professional and business services led the way, creating 57K jobs on the month. However, half of those jobs came from temporary help services. Again, this is good news because a rise in temp jobs generally precedes a rise in permanent jobs. On the flip side, continued reliance on temp services suggests companies are not totally convinced of the sustainability and strength of the recovery to add to full-time staff. Part of the hesitance in hiring is coming from uncertainty surrounding the healthcare overhaul, which is making it difficult for firms to plan their budgets and benefits coverage. Leisure and hospitality services also saw a pickup in job growth to 43K in May from 39K in April as stronger job growth and rising confidence loosened up the purse strings on leisure spending. Retail trade saw a nice bump of 27K jobs, better than the 19K seen in April. Meanwhile, the education and healthcare sector saw weaker job growth than in April as healthcare and social assistance jobs rose at only a third of the previous month's pace. Construction job growth rebounded, adding 7K jobs, following a loss of 2K jobs in April, driven primarily by further increases in residential specialty trade contractors amid continued healing in the housing market.
The slowdown in manufacturing was evident in the payroll report as both manufacturing and transportation & warehousing lost jobs in May. The manufacturing sector is reeling from ongoing weakness in Europe and a slowdown in China. Government payrolls also fell during the month, shedding 3K jobs after falling by 8K jobs in April, as government budget cuts continue to weigh on public employment.
The unemployment rate rose for the first time since October. While the increase in the unemployment rate may seem like bad news, it is actually good news since it was driven primarily by job seekers returning to the labor force in the hopes of finding work, suggesting workers are feeling more optimistic about their prospects. The workweek held steady at 34.5 hours, while average hourly earnings growth held at 2.0% year-over-year. This is a much weaker pace than prior to the recession, which is helping to keep inflation contained.
Today's report was about as good as it gets for the stock market. Job growth was decent, but not strong enough to think the Fed might pull back on quantitative easing. Investors are finding themselves in a goldilocks scenario right now, as seemingly nothing is deterring market enthusiasm. Oddly enough, about the only thing that has had any downward influence on the market recently has been good economic news! I expand upon this in my previous blog post, where I suggest that it is imperative to understand what is going on behind the scenes that is causing the stock market to remain so strong despite a continually weak economy. The party can't last forever, and it won't. There is no phrase worth remembering more than this one: There is no free lunch. Sooner or later, the Fed's free money scheme will end, and the reality of a weak domestic and global economy, along with the huge risk being piled up on the Fed's balance sheet, will set in, and the market will get a rude awakening.