By FRANK CONTE
Editor and Publisher
Judging from the headline, the most recent report from the Bureau of Labor Statistics on the U.S. employment situation showed continued job growth. Total nonfarm payroll employment increased by 139,000 above expectations from economists who track the job market. A Wall Street Journal poll found that that its respondents — comprised of economists — predicted 125,000 jobs. The unemployment rate, the other most-watched number, remained unchanged at 4.2 percent, which a few observers say is close to full employment. In fact, the rate has remained in the range of 4.0 percent to 4.2 percent since May 2024. The report looked good for current jobholders. Wages are up 3.9 percent, outpacing the rate of inflation.
So why are most experts worried? First, the jobs number reported on the first Friday of the month are mere first drafts. The BLS constantly revises past estimates. This month, the BLS revised downward the payroll numbers for both the months of March and April. Combining both months, employment is 95,000 lower than previously reported. Revisions happen all the time but downward revisions indicate there’s more to the story. Firms aren’t adding as many jobs as first reported.
One other indicator that worries economists is the decline in the labor force participation rate which reveals more about the jobs market than the two headline numbers. The labor force participation rate is considered one of the most important employment indicators because it measures how many people are actively engaged in the economy—either working or looking for work—relative to the working-age population.
The main reason why the unemployment rate remained unchanged is because the number of workers engaged in the economy dropped. If that engaged worker number increased the unemployment rate would have gone down further. It didn’t.
The number that’s causing real alarm is the drop in engaged workers which dropped 625,000 from April to May. That number may represent the departure of foreign-born workers – both legal and illegal – who may have left the job market. But more likely that number reflects the fact that more Americans are retiring earlier. According to the Urban Institute: “Individual claims for retirement benefits are up 13 percent compared with this time last year, an increase of more than 276,000 claims.”
In May there were job gains in education & health services, leisure and hospitality but a drop in government. Brian Wesbury of First Trust Economics drilled down the latest report by focusing upon the private sector to reveal the durability of the current jobs market. In his analysis, Wesbury excludes government, education & health services, and leisure and hospitality, all of which are heavily influenced by government spending and regulation (mostly around the rebound from Covid 19 closures). Government employment due to federal layoffs declined but education and health services (both dependent on public spending) as well as leisure increased.
His measure of what he calls “core payrolls” — mostly the pure private sector — “increased only 5,000 in May and is up only a grand total of 26,000 in the past three months.” Here’s another observation that seems to support Wesbury’s analysis. According to Moses Sternstein of Random Walk on Substack: “An economy propped-up by an acyclical (and unsustainably expensive) healthcare sector, isn’t signaling ‘strength’ to begin with.”
Furthermore. the payroll processing company ADP’s monthly survey of May private-sector payrolls showed the slowest pace of hiring in more than two years. “After a strong start to the year, hiring is losing momentum,” noted Nela Richardson ADP’s Chief Economist.
All this, beyond worries about tariffs and the adoption of Artificial Intelligence replacing jobs, adds to uncertainty.
To put it another way: if you have a job, things look somewhat positive for now. But if you are looking for a job, as many college graduates are now doing, you might find it tougher.
A version of this article appeared as an unsigned editorial in the Wakefield Daily Item on June 15, 2025.
