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5 Things We Learned From The May Jobs Report

GCG Weekly Market Update – June 8, 2015

Markets ended lower last week as investors balanced an optimistic jobs report against renewed concerns about a Greek debt default. For the week, the S&P 500 lost 0.69%, the Dow fell 0.90%, and the NASDAQ slid 0.03%. (1)

On Friday, we got a look at how the labor market did in May. After jobs growth stuttered in the first quarter, investors were looking for reassurance that the economy can still support hiring. Here are three good things and two not-so-good things that we learned:

1.) The economy created 280,000 new jobs in May, beating expectations and leaving economists feeling optimistic about growth this quarter. (2)
2.) The unemployment rate ticked upward to 5.5%, but that’s mostly a result of an increase in the number of people looking for jobs. A higher labor force participation rate is a good sign because it means people are feeling confident enough in job opportunities to go looking, so we’ll count this one as a positive. (3)
3.) Lagging wage growth, which has concerned economists, appears to be reversing with U.S. workers adding $0.08/hour to their paychecks last month. Wage growth over the last three months is much closer to the 3.0% we’ve seen in past economic recoveries. (4) Since economic growth depends heavily on consumer spending, we can hope that bigger paychecks will translate into a greater willingness to spend.
4.) In the not-so-great category, we learned that the majority of the new jobs created were in low-paying industries like retail, hospitality, temp work, home health services, etc. (5) Though we’re seeing an uptick in full-time work, many Americans are still struggling to find good-paying jobs, which may limit their ability to qualify for a mortgage and make big-ticket purchases.
5.) Productivity, measured in output per worker hour, registered a dismal 0.3% increase last month. Productivity is a major factor in long-term economic growth, and low labor productivity could be a warning sign. Is it cause for worry?

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