Weak Household Survey Continues To Tell Much More Pessimistic Story

The real question in May's employment report is: what is going on with the Household survey which showed unemployment picking up unexpectedly to 4.0% from 3.9% (recall that the unemployment rate is calculated from the Household survey, not the headline payrolls Establishment survey).

• There are no easy answers to the long-standing debate about whether the HH or Est survey is showing the "true" state of the labor market, but it's quite clear that they are telling very different stories. As for May's report:
• Part of the higher-than-expected unemployment figure is the rounding effect (3.96% unrounded, from 3.86% prior, unrevised), but that's still the highest UE rate since January 2022.
• The number of unemployed increased by 157k in the household survey (+63k prior), to the highest since November 2021 (6.649m).
• Employment dropped 408k in the household survey after +25k in April, bringing this year's grand total of job gains to -100k. That's a very different story from the Establishment survey showing +1.239m more jobs.
• The participation rate unexpectedly dropped to 62.5% from 62.7% prior - a 4-month low, unrounded. That came despite a pickup in age 25-54 participation, with age 55+ participation pulling back to 38.4% (down 0.2pp) and 16-24s down to 56.7% (down 0.1pp).