Key Points

  • The May employment report was strong across nearly all metrics, with the notable exception of the labor force participation rate.

  • The unemployment rate is comfortably below the natural rate of unemployment, which has implications for inflation.

  • Labor force participation remains moribund, but the devil is in the details.

The May employment report, put out by the Bureau of Labor Statistics (BLS) this past Friday, made the cover of Saturday’s NY Post with a headline of “We’re in the Money.” I’m not sure that represents a classic contrarian signal, but it’s not a stretch to say that the labor market has become quite tight and that it represents one of many signs that the economic expansion is in its latter stage(s).

92 months and counting

The employment report for May had much in it for the economic bulls to cheer. It was the 92nd month during which there was positive payrolls growth—the longest stretch in the history of the data.

Record Run For Job Growth

The unemployment rate dipped further to 3.8%—in fact, it was precisely 3.755%, so it almost made it to 3.7% when rounded. It’s often the case that when I mention or show the standard (U3) measure of unemployment, it’s met with criticism that it fails to incorporate the marginally-attached worker and/or those working part-time for economic reasons. Those are captured by the broader U6 measure of unemployment.