U.S. private payrolls increased by 278,000 jobs in May, according to the ADP National Employment Report released Thursday, stronger than the anticipated 170,000. There was also a revision to the previous month's report, lowering it by 5,000 jobs from 296,000 to 291,000.
When breaking it down by sector, leisure and hospitality continues to lead the employment figures by showing an additional 208,000 jobs. These gains may go stagnant since we are now showing more people in that sector than there were before the COVID pandemic. The report also indicates that there is a slight decrease in the annual pay from the previous readings.
Initial jobless claims have also been released, indicating that those filing for unemployment benefits for the first time have actually increased by 2,000. The average being released for the previous month shows to be about 230,000 initial jobless claims. Those who continued to receive unemployment benefits after their first claim rose to 1.795 million, an increase of 6,000. This continues to remain at one of the highest levels we've seen in a very long time and it continues to point out that the job sector is not nearly as strong as many indicate.
The Bureau of Labor Statistics report comes out after ADP’s and indicates that there were 339,000 jobs created in May, significantly higher than the initial estimate of 190,000. There were two surveys used to create this report: the business survey and the household survey. The business survey number comes from a lot of modeling and estimations. The household survey is created by households being called directly to see if they are employed.
One of the problems that come from these estimations and modeling practices is that we don't know the real employment numbers. Using these methods have a way of making it seem like the economy is continuing to do well, but it is contrasted by the unemployment claims as well as the fact that the average work week fell to 34.4 hours in May.
The fact that we have so many people not working a full 40-hour work week in itself would reflect a significant employment issue. Consider how many people would not have jobs if every job was full-time. That in itself brings alarm to our economic conditions. Add to that the fact that we have the Organization of the Petroleum Producing Countries (OPEC) maintaining its course for production cuts in 2023. Saudi Arabia itself announced that it would be reducing its output by 1,000,000 bottle barrels a day starting in July. This will add pressure to the energy sector with increased expenses for already struggling households.
Every one of these issues has an influence over the markets and what we can expect in the lending and real estate industries. The ability of the average household to support itself, increase its savings, and invest in its future is dependent upon how our economy operates. The future of our markets depends heavily on the individual feeling of stability of what people can expect to receive for an income and expect to have for expenses.
About the Author:
Aaron Chapman is a veteran in the finance industry with expertise in complex transactions since 1997. He is ranked in the top 1% of over 300,000 licensed loan originators and closes over 100 transactions per month. Learn more at aaronbchapman.com.
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