Summary for Week Ending June 1st

This was a banner week for economic observers who scream "Miss!" every time an economic report is weaker than expected. The list of disappointing reports is long: a weak employment report, a downward revision to Q1 GDP growth, a disappointing ISM manufacturing index, weaker than expected auto sales, an increase in weekly unemployment claims, house prices at new post-bubble lows, pending home sales were down, and the Chicago PMI was weaker than expected.

Meanwhile the European crisis is grabbing headlines again, and June is another "kick-the-can or break" month for Europe (Usually the saying is "make or break", but there is no "make" on the horizon in Europe).

The weak data is a reminder: Every time the data is better than expected, some observers start predicting robust growth. And every time the data is weak, like last week, other observers start predicting another recession. Both groups have consistently been wrong; this is more of the sluggish and choppy growth that is typical following a financial crisis.

I'll have more on the economic outlook this week (the negatives and a few positives).

Here is a summary of last week in graphs:

' May Employment Report: 69,000 Jobs, 8.2% Unemployment Rate

Click on graph for larger image.

This was a weak month with only 69,000 payroll jobs added. Also the previous two months were revised down.

There appeared to be some additional weather related "payback" in May offsetting the relatively solid job growth during the winter months. As an example, construction employment was down 28,000 (seasonally adjusted), and "leisure and hospitality" declined by 9,000 jobs. Both were up solidly Not Seasonally Adjusted (NSA) in May. Construction was up 169,000 jobs, and leisure and leisure and hospitality increased 312,000 jobs NSA, but this is less than usual in May - probably because of the hiring during the winter - and the seasonally adjusted numbers were down. This weather "payback" is probably over now.

However weather payback probably only accounts for some of the recent slowdown in hiring.

The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate increased to 8.2% (red line).

The household survey showed a strong increase in employment (422,000 jobs added), but the participation rate increased too from 63.6% to 63.8% (blue line) so that pushed up the unemployment rate. The household survey job gains - and increase in the participation rate - are small positives.

The Employment-Population ratio increased to 58.6% in May from 58.4% in April (black line).

The third graph shows the job losses from the start of the employment recession, in percentage terms. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was weaker payroll growth than expected (expected was 150,000).