Energy News Beat
Federal government jobs fell by 22,000, to the lowest share of total payrolls since… whenever.
By Wolf Richter for WOLF STREET.
Total nonfarm payrolls rose by 139,000 in May, to 159.6 million, according to the Bureau of Labor Statistics today (blue columns in the chart). The increase of 139,000 new jobs is fine. It’s close to the 12-month average (144,000). It’s better than six months out of 12 in 2024.
Federal government jobs fell by another 22,000 in May. Excluding the federal government, the economy created 161,000 jobs in May. That is solid growth.
The three-month average, which irons out some of the month-to-month squiggles and includes the revisions, rose by 135,000 (red line in the chart). The low point was in mid-2024.
Without the federal government: Civilian jobs at the federal government fell by another 22,000 in May, bringing the job losses at the federal government over the past three months to 46,000.
Excluding federal government jobs, the economy created 161,000 jobs in May, up from April (160,000), and the most since December. The three-month average increased by 151,000 jobs. This is solid job growth.
The share of civilian jobs at the federal government dropped to 1.85% of total nonfarm payrolls, the lowest share since… whenever.
In 2022-2024, job growth at the federal government was a big driver of total job growth. This year, the opposite has been the case – total payrolls grew at a decent pace despite the decline in federal government jobs.
But the payrolls data still doesn’t show the full effects of the federal government job cuts so far: Workers on paid leave or receiving severance pay are counted as employed until they stop being paid.
And government payrolls don’t include employees working for companies that have contracts with the government and that are now getting laid off. These workers are counted in the various nongovernment categories, such as in the huge category of “Professional and business services,” where employment has been stagnating in recent months.
It’s an OK labor market. This is not a hot labor market anymore with labor shortages, like in 2021 and 2022. It’s an OK labor market that is growing at an OK pace.
But wages rose faster, and that’s good for workers, spending, consumption, savings, and future investment — all of which are good for economic growth now and in the future. But higher wages might provide some fuel for inflation.
The Fed has been talking about the possibility that the crackdown on illegal immigration might tighten up the low end of the labor market and put upward pressure on wages, and higher wages would stimulate demand a little and support economic growth, which might add a scintilla of fuel to inflation.
And especially service providers that employ workers at the lower end of the pay scale, such as the hospitality industry, might try to raise prices as labor costs rise. But they’re always trying to raise prices until their sales drop.
Average hourly earnings jumped by 0.42% in May from April (5.1% annualized), according to the establishment survey by the BLS today.
The three-month average growth (red line) accelerated to +3.8% annualized, at the top end of the range that prevailed during the strong labor market in 2018 and 2019.
Year-over-year, average hourly earnings rose by 3.9% in May, slightly faster than in April, but same pace as in March, and this seems to be where wage growth has stabilized recently, well above the wage growth before the pandemic.
Unemployment rose by 71,000 in May to 7.24 million people who were actively looking for a job during the survey period, according to the BLS household survey data today.
With the sudden inclusion in the household survey data this year of the surge in immigrants in 2021-2024 (we discussed this here), the major components of the household survey data jumped in 2025 through May by:
- Labor force: +1.96 million
- Total employment+ 1.61 million
- Unemployment: +351,000
The headline unemployment rate (U-3) remained at 4.2% in May. Since June 2024, the unemployment rate has stabilized at the historically low range of 4.0% to 4.2%.
The unemployment rate = number of unemployed people who are actively looking for a job (7.24 million) divided by the labor force (170.5 million).
An unemployment rate of 4.2% is historically relatively rare and indicates a solid balanced labor market, despite the large-scale influx in just three years of millions of immigrants. And it remains below the Fed’s median projection at the March meeting of 4.4% for the end of 2025:
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The post Excluding Federal Government Jobs, Payrolls Grow by 161,000 in May, Wages Jump, Despite All Moaning and Groaning appeared first on Energy News Beat.
