EIB #14 - Strong Jobs Number Beats Expectations
On today's jobs report, a RecessionWatch update, and answering questions about U.S. demographic data and the interest rate on U.S. federal debt.
All,
In today’s EIB, please find:
Key Takeaways from Today’s Jobs Report
The U.S. economy added 139,000 non-farm jobs, beating expectations.
The unemployment rate was unchanged at 4.2%.
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Best,
Chris
Key Takeaways from Today’s Jobs Report
At 8:30am ET, the BLS announced that in May:
The U.S. economy added 139,000 non-farm jobs, beating expectations of 125,000.
140,000 jobs were added in the private sector, almost all in the service sector.
Health care, leisure and hospitality, and social assistance had notable gains.
Federal employment fell by 22,000 and is down 59,000 since January.1
The headline unemployment rate was 4.2%, unchanged from last month.
The BLS revised down its jobs estimate for March and April by a combined 95,000.
Wages likely rose faster than consumer prices. Average hourly earnings rose by 15 cents (0.4% m/m). The Cleveland Fed nowcast that the CPI rose by 0.13% m/m.
Overall, I think this is a fine report for messaging. Jobs added beat expectations, wage growth was strong, and federal employment continues to fall without catastrophe.
RecessionWatch
However, the internals of this morning’s jobs report have given me pause.
While the jobs added number from the payrolls survey is solid, the household survey instead indicates severe job loss (-696,000). The household number tends to be more volatile but better at capturing the start of economic downturns. That said, the unemployment rate (from the household survey) was unchanged at 4.2%.
The continued downward revisions to payroll employment is also a concerning sign. Failing firms are less likely to immediately respond to surveys, so downward revisions due to new (late) responses is generally a bad signal about employment.
Sentiment readings are mixed. The Consumer Confidence Index rebounded by an incredible 12.3 points on the news that Pres. Trump’s tariffs would be largely paused.2 However, both manufacturing and services PMI indexes fell, with both indexes being in contractionary territory.
I am going to hold off on making a call for May until I have a bit more certainty.3
Mailbag
Can you update us on demographic statistics for the United States (e.g., age and fertility)?
Age
The median age in the United States has risen to 39.2 years old.4
Over 17 percent of the U.S. population is aged 65 years or older.
Marriage and Fertility
Men’s and women’s median age at first marriage have risen to 30.2 and 28.6 years old, respectively. This is an increase of 7.4 and 8.3 years, respectively, since 1950.
Total fertility in the United States has fallen to 1.6 children per woman. This is below replacement (roughly 2.1) and is lower than at any time in U.S. history.
A woman’s average age at first birth has risen to 28 years old. This age reflects an increase of two years since 2009, and is higher than at any time in our U.S. history.
Workforce
The labor force participation rate has fallen to 62%, down from a peak of 67% in March 2000. This decline is due (in substantial part) to our aging population.5
The ratio of covered workers to Social Security beneficiaries has fallen to 2.7, down from 3.5 in 2000. The Trustees project that the ratio will continue to decline.
Obesity
40.3% of U.S. adults are obese, while 9.4% of U.S. adults are severely obese.6
The rate of severe obesity continues to rise, even adjusting for average age.
Bottom line: The U.S. demographic picture grows ever bleaker.
What is the average maturity and average interest rate on U.S. Treasury debt?
As of March, the weighted average maturity (WAM) of marketable Treasury debt was 71 months (5.9 years). Over the past 10 years, the WAM has averaged about 70 months.
The average interest rate on Treasury debt is 3.3%, around the highest level since 2009.
If interest rates remain elevated, then the average interest rate will increase as maturing Treasuries are rolled over at auction. Roughly $9 trillion (or one third) of marketable Treasuries will need to be rolled over within the next 12 months. More non-marketable debt will need to be issued (e.g.) at the start of the new fiscal year.
Upcoming Data Releases
June 11, 8:30am ET. The BLS will release the CPI report for May 2025. Will this be the fourth consecutive month that inflation falls back towards the Fed’s 2% target? The Cleveland Fed nowcast suggests that 12-month inflation will tick up to 2.4%.
June 18, 2:00pm ET. The Federal Reserve announces its monetary policy decision. The current target range for overnight interest rates is 4.25% to 4.50%. Owing to solid job growth, above-target inflation, and high uncertainty about tariffs, options markets are pricing a nearly 100% chance that the Fed will keep the target range unchanged.
June 26, 8:30am ET. The BEA will release its “third” estimate for Q1 real GDP growth. The current estimate is -0.2%.7 From a messaging perspective, the key question is whether the BEA will revise real GDP growth into positive territory.
July 3, 8:30am ET. The BLS will release the jobs report for June 2025.
Employees on paid leave or receiving ongoing severance are counted as “employed” in the payroll survey.
N.b., the Index of Consumer Sentiment fell by 1.4 points to its second-ever lowest level. (The lowest level was in June 2022 when 12-month CPI inflation hit a four-decade high.) Nevertheless, I generally discount the Michigan Survey because it tends to be unreliable as an economic indicator. The survey captures seems to better capture the respondents’ political sentiment, which can be quite divorced from the economic fundamentals.
RecessionWatch provides real-time analysis of whether the U.S. economy is in a recession. Whereas the NBER usually takes between 4 and 21 months to “officially” call a recession, I make tentative recession calls at the start of each month. RecessionWatch is not a recession forecast. I am not predicting whether there will be a recession (e.g.) next month or next year.
Sorry, ladies: Your median age is over 40 years old. This slightly higher median age is an unfortunate statistical side effect of your greater longevity. You win some, you lose some.
(a) Severe obesity is a subcategory of obesity. 30.9% of U.S. adults are “non-severely” obese.
(b) These data are from the National Health and Nutrition Examination Survey (NHANES). This survey is phenomenal because CDC takes direct measurements from respondents. E.g., unlike a telephone survey, it does not rely on people’s (under) estimates of their own BMIs.
However, NHANES data are only released with a lag. The current data reflect 2021 to 2023, and may not reflect benefits from recent pharmaceutical advancements (e.g., GLP-1ra’s).
Seasonally adjusted annualized rate.