Chart of the Day: Net New Jobs in May

The American economy added 38,000 new jobs last month. However, since we need 90,000 new jobs just to keep up with population growth, this means that net job growth clocked in at a dismal -52,000 jobs. The official excuse for this drop was the big Verizon strike, but that seems unlikely to account for more than a fraction of the bad news.

The headline unemployment rate declined to 4.7 percent, but obviously this isn’t because more people found work. It’s because a whopping half million people—most of them unemployed—simply dropped out of the labor force. The bleak arithmetic is on the right. However, it’s not clear why so many people exited the labor force. Some are new retirees, of course. More pointedly, some of them appear to be long-term unemployed who got discouraged and gave up looking for work, but that accounts for only part of the drop.

Unsurprisingly, labor force participation was down by 0.2 percentage points. Hourly earnings of production and nonsupervisory employees were up at an annual rate of about 1.7 percent compared to last month, which means wages were about flat in real terms. Overall, this was a really discouraging report. If you insist on a silver lining, here it is: It’s probably less likely now that the Fed will raise interest rates at their next meeting.