By Steven R. Drexel, President and CEO of Cornerstone Staffing Solutions, Inc.

As an Economist and seasoned staffing industry professional, I’m regularly asked to participate in a number of monthly surveys and discussions that predict key elements of the next Bureau of Labor Statistics’ (“BLS”) press release describing The Employment Situation. The next release revealing May’s statistics will be out on Friday, June 3rd, (typically the first Friday of each month reporting on the previous month’s activity).

The BLS offers many statistics covering weekly, monthly, quarterly, and yearly data and comparisons. Insofar as I dive deep into the data (national, industry and company), this commentary shares my thoughts and observations directly related to predicting how May will perform compared to the recent past. Cornerstone’s stakeholders and other interested parties may find the following remarks helpful in assisting with business strategies and objectives for the near term.

What you’ll find in this Commentary:
• April’s results were disappointing.
• Will May’s report indicate that the labor markets rebounded?
• What do we expect for the balance of 2016?

April’s disappointing report. On Friday May 6, the Bureau of Labor Statistics released its monthly summary of labor market activity for April 2016. The attention-grabbing number was a disappointing increase of 160,000 jobs, while the unemployment rate held steady at 5.0 percent. Economists, who form their predictions based on a number of factors, had expected an employment increase of around 200,000, more in line with the 208,000 (revised) increase reported for March. The slower rate of growth was disappointing, and tends to confirm the narrative that the broader economy has slowed during recent months as was evident in the announcement that Gross Domestic Product (GDP) growth was only 0.8 percent during the first quarter of 2016. Other softer results included the observation that the labor force participation rate declined slightly to 62.8 percent, indicating that fewer unemployed workers were actively seeking employment during April. Additionally, of the 262 industries reported, a smaller percentage was growing as this metric declined from 58.6 percent to 56.3 percent.

The substandard jobs increase, could foreshadow a change in the trajectory of growth I’ve advocated, although, it is worth noting that 2015 was overall, a good year for employment growth, and yet, it included three months in which employment grew at a slower rate than April’s 160,000 increase. Furthermore, generally, an increase of 100,000 is enough to absorb new entrants into the working age population, so the 160,000 is more than adequate to sustain an expansion. Encouraging elements of the report included the fact that average hourly earnings improved to provide a welcome and improved 2.5 percent year-over-year increase. Moreover, the average workweek edged up one tenth of an hour to 34.5. Looking at the industries that had the biggest contributions to the change in employment it is apparent that most of the weakness was related to construction, retail trade and government. Construction was unusually strong during the mild winter and retail trade could be skewed by the earlier observance of Easter this year. Mining and energy related industries remained weak as expected due to still depressed oil prices. On the other hand, professional and business services as well as financial services and education and health services reported strong results.

May’s report is likely to be below trend as well. I expect Friday’s Employment Situation Report covering May’s activity to indicate that the labor market expanded by 180,000 jobs and the unemployment rate will again hold steady at 5.0 percent. I believe that the labor markets are still healthy and growing — but at a modestly slower rate than we saw during recent years and below the expectations with which we started 2016. The other factor that plays into the forecast is the knowledge that May’s results likely will be affected by the Verizon strike that was in full effect during May and while temporary, this could depress the reported results.
Positive employment-related economic indicators during April included the following:

• The American Staffing Association’s Monthly Index was 0.9 percent improved during May compared to April suggesting that job growth is a bit better than recent trends; and
• The private employment surveys that I participate in continued to suggest growth during May albeit at slow but steady pace.

Less than positive employment indicators included the following:
• The Philadelphia, Richmond and Kansas City Fed Manufacturing Surveys sub-indexes for Employment and the Average Workweek all were weaker during May as compared to April. Only the Richmond Fed Services Employment Index improved during May;
• Initial Jobless Claims as well as Continuing Jobless Claims increased during May, particularly during the reference weeks from which the Bureau of Labor Statistics draws its survey. The levels are not alarming but the direction suggests slower growth (likely influenced by the Verizon strike);
• The Wall Street Journal’s April Economic Survey of 72 leading economists forecast of employment for 2016 was 2.9 percent lower than the April forecast reflecting lower expectations; and
• The Conference Board’s May differential of “jobs plentiful” versus “jobs hard to get” slid to a net -0.1 during May, down from +1.4 during April.

Expectations for June, the balance of 2016 and beyond. ‘Slower but still positive’ is the key message this month, and to a lesser degree, the same is true looking forward with respect to the general economy. Employment growth remains a key element supporting the broader U.S. activity with continued backing coming from vehicle production and housing. Wage growth is not slowing but rather, gradually increasing, which is important to boost retail sales, another necessary driver of continued growth. There are fewer headwinds represented by declining oil prices, unsettled financial markets, falling commodity prices and an overpriced dollar to obstruct or derail growth. However, there is a bit less momentum as the expansion is aging, earnings are soft and GDP was challenged during the early part of 2016. Expect jobs growth during the remainder of 2016 to average about 190,000 per month while the unemployment rate trends down slightly to 4.7 percent by year end.

In conclusion, I expect that May produced 180,000 net new jobs and a 5.0 percent unemployment rate. Employment growth slowed a bit during recent months, but remains positive and is expected to continue to grow albeit as slightly slower rates. The risk of recession remains low and the expansion should continue through at least 2018. The amassed effect of over five years of employment growth results in more severe labor shortages and accelerating wage pressure. I invite you to call me if you have any questions and share this commentary with your colleagues and professional network.

More about Cornerstone Staffing Solutions
Cornerstone Staffing Solutions is among the top 120 largest staffing firms in America, as ranked by Staffing Industry Analysts and received Inavero’s 2016 Best of Staffing® Client Award. Since 2003, Cornerstone has grown from a neighborhood staffing provider to a $100 million national firm that employs thousands of people at hundreds of companies from coast to coast. Providing candidate searching and job placement for administrative, industrial, technical, sales and transportation positions, Cornerstone truly is where talent and jobs meet. Visit Cornerstone at: http://www.cornerstone-staffing.com.