If you're going to buy a pre-owned, used car like so many people have to do nowadays, you can't just be impressed by a shiny new paint job.
Instead, you've got to look under the hood. You've got to check out the engine, the oil, battery, brake fluid and spark plugs.
Well, today's release of the May jobs report is much the same. The shiny, new paint job was a significant 272,000 increase. Although nearly half of that was government and government-related jobs, that's what the nonfarm payrolls showed. However, when you lift up the hood, what you see is an incredible 408,000 job loss from the household survey.
US JOB GROWTH JUMPS BY 272K IN MAY WHILE UNEMPLOYMENT UNEXPECTEDLY RISES
So what's the difference between the two? Well, the payroll establishment survey is mostly larger, established companies where the Bureau of Labor Statistics dials up the human resources department and gets a job headcount, but for the household survey, the BLS mainly calls families and individuals to ask if they are employed or not.
Traditionally, the household survey is more heavily weighted toward small businesses, and actually over the past year has produced only a tiny 31,000 increase in jobs. Now, additionally, under the hood, the civilian labor force shrunk by 250,000 and as a consequence, the unemployment rate notched up to 4%. And another key indicator of the labor force is the employment-to-population ratio, which fell slightly in May to 60.1%.
Now aside, the late, great labor economist Ed Lazear, former CEA chair, longtime professor at Stanford University, Ed Lazear always pointed to the employment-population ratio as the single best indicator of labor market strength or weakness. He was, by the way, a dear friend and mentor of mine.
Now, during the Trump years, the employment population ratio reached 61.1% — that's 1% higher than today's number. However, going further back, the peak in that ratio was 64.6% in May of 2000. So, the point here is more people ought to be working.
And my guess is, among the many complexities of the job story, both federal and state governments more and more are offering overly generous benefits not to work, but there is more concern with these job numbers.
WHITE-COLLAR WORKERS ARE STRUGGLING TO FIND JOBS AS THE LABOR MARKET SLOWS
Once again, full-time jobs fell 605,000 in May. This is not a monthly problem — this is a long-playing record. It's mirror image: Part-time jobs gained 286,000. So if full-timers are plunging and part-timers are surging, that cannot be a healthy economic sign. Additionally, in just May alone, 414,000 immigrants, both legal and illegal, gained jobs, while 663,000 native-born Americans lost jobs. This discouraging pattern has been going on for quite some time, but the trend line has accelerated significantly during the Biden years.
Now, in terms of the ongoing Biden affordability crisis, if you call through the numbers over the past 12 months, the combination of average hourly earnings — that's wages — for production people — working folks — that times, hours worked, you get a proxy for their income, and that income number comes to only 3.4% increase, which is about the same as the consumer price index, which means they're not getting ahead of the ongoing inflation.
Indeed, over Biden's entire term, real wages have fallen while all these prices have exploded.
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So when you look at all these car parts under the hood, frankly, I think folks are going to buy a much better model: one that has lower taxes, deregulation and drill, baby, drill. We'll have to find a car that suits all that.
This article is adapted from Larry Kudlow’s opening commentary on the June 7, 2024, edition of "Kudlow."
