We've updated our monthly workforce analysis to include last week's Employment Report for May. The unemployment rate ticked down from 4.4% to 4.3%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) disappointed forecasts at 138K.

The Unemployment Rate

The closely watched headline unemployment rate is a calculation of the percentage of the Civilian Labor Force, age 16 and older, that is currently unemployed. Let's put this metric into its historical context. The first chart below illustrates this monthly data point since 1990.

In the latest report, this indicator dipped to 4.3%. The age 16+ population increased by 179 thousand, and the labor force (the employed and unemployed actively seeking employment) dropped by 429 thousand. The number of employed decreased by 233 thousand while the ranks of the unemployed fell by 195 thousand. Essentially the decline in the unemployment rate was not the result of increased employment but rather the shrinking labor force, especially the employed.

Unemployment Rate since 1990

Unemployment in the Prime Age Group

Let's look at the same statistic for the core workforce, ages 25-54. This cohort leaves out the employment volatility of the high-school and college years, the lower employment of the retirement years and also the age 55-64 decade when many in the workforce begin transitioning to retirement ... for example, two income households that downsize into one-income households.

In the latest report, this indicator remained at 3.8% (to one decimal place) from the previous month. The cohort population increased by 40 thousand and the labor force dropped by 150 thousand. The breakdown of the growth is an increase of 30 thousand employed and a 168 thousand decrease in the unemployed. Most of the subdued labor force growth was due to the decrease in the number unemployed.

Unemployment Rate Ages 25-54