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

On Friday June 3rd, the Bureau of Labor Statistics released its monthly summary of labor market activity covering May 2016. Economists had expected slower growth, but even allowing for lower expectations, the report was alarming in its weakness. Only 38,000 new jobs were created during May and revisions to the previous months further depressed the picture. A temporary factor that depressed growth was the now concluded Verizon strike that reduced the increase by 34,000 jobs. For context, the consensus expectation was an increase of about 160,000 jobs. The unemployment rate improved from 5.0 percent in April to 4.7 percent during May. Even this normally favorable movement reflects weakness because it was caused by a sharp reduction in job seekers rather than successful landings by unemployed workers. More inclusive measures of unemployment, that take-in underemployment, were unchanged during May. One positive result, in the report, was the persistence of improvement in average hourly earnings which is running a fairly consistent 2.5 percent above the prior year. Also, the average hourly workweek held steady at 34.4 hours unchanged during the last three months.

The Bad News
With this report, it is undeniably evident, that employment growth is significantly slower. During the most recent three months, job growth averaged 127,000 positions, even after adjusting for the Verizon strike. In contrast, during the three months ending in February 2016, job growth averaged 224,000 positions. The weakness was broad-based as only 51.3 percent of the industries reported growth compared to almost 60 percent as recently as January. Only the healthcare industry sector showed impressive growth. The slowing trend in employment is very likely a postponed response to weak corporate profits, turbulent financial markets, a stronger dollar and weak foreign demand which were all manifest during recent months and quarters.

The Good News
We can take some comfort in the knowledge that other metrics used to measure the strength of the labor markets are not as alarming as the May jobs report. The weekly Jobless Claims are at the same or better levels than they were a year ago when the job market was clearly robust. There has been no alarming increase in Announced Layoffs. The March Job Opening and Labor Turnover Survey indicated that job openings are remarkably strong and the overall labor market is healthy. Very recent surveys indicate that U.S. Hiring Plans remain resilient. Finally, the ADP National Employment Report, which includes actual payroll records covering 20 percent of the workforce, indicates that private job growth is 50 percent stronger than what the Verizon adjusted BLS report presents.

The Outlook
Taking all the metrics into account, it is clear that current job growth is slower than the forecasts and expectations. This creates a heightened risk that the broader economic expansion could be in danger. However, the indicators point to stronger GDP during the current quarter since financial markets have recovered, and housing and vehicle sales remain strong. Further, retail sales broadly, have improved recently. So while I don’t expect jobs to grow as fast as they did during 2015, job growth should return to around 150,000 per month, or enough to absorb new entrants into the labor force and maintain a low unemployment rate coupled with increasing average hourly earnings. The expansion will continue albeit at a slower but steady rate.

Please feel free to contact me if you have any questions or comments.

More about Cornerstone Staffing Solutions
Cornerstone Staffing Solutions is among the top 120 largest staffing firms in America, as ranked by Staffing Industry Analysts. 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 California to Connecticut. Providing candidate searching and job placement for administrative, industrial, technical, sales and transportation positions, Cornerstone truly is where talent and jobs meet. Visit us at: www.cornerstone-staffing.com.