Disguise of Stability

139,000 jobs added. 696,000 workers gone. 625,000 left the labor force.

139,000 new jobs. That was the headline. Markets liked it. Futures green, analysts relieved, the usual nonsense. As if that number told the whole story.

It didn’t.

Healthcare added 62,000. Hospitality chipped in 48,000. Social assistance threw in another 16,000. That’s more than 90 percent of the gain. Three sectors holding up the entire report.

The rest of the economy? Either flat or worse.

Manufacturing shrank. Construction barely moved. Temp work fell again. That part matters. Temporary staffing is where employers flinch first. It’s the easiest labor to cut. It fades quietly, but it always fades before the rest.

Then there’s the federal government. Down 22,000 jobs in May. Fourth straight month in the red. Budget cuts, buyouts, early retirements, and whatever Elon Musk is doing with his bizarrely named “Department of Government Efficiency.” DOGE. It was funny at first. Now it’s just cleaning out departments and canceling contracts.

Take those cuts out and the private sector added about 161,000 jobs. Not bad on paper. Not enough to ignore everything else.

Let’s talk about that other number. The household survey.

It showed a loss of 696,000 workers. That’s not a rounding error. That’s not noise. Full-time employment collapsed by over 600,000. At the same time, part-time roles ticked up.

Labor force participation dropped to 62.4 percent. Lowest since early 2020. That’s half a million people stepping out of the workforce in a single month. Gone.

The unemployment rate stayed flat at 4.2 percent, but only because the denominator got smaller. This is the labor market equivalent of pulling the fire alarm and blaming the smoke.

Meanwhile, wages rose 0.4 percent in May. Almost 4 percent year-over-year. Not just holding up—accelerating.

Wage inflation doesn’t care about your soft landing. It moves slowly, then sticks. Especially in services, where labor is the main cost. The Fed watches that like a hawk. And right now, it has no room to move.

They can’t cut rates into this. But they can’t hike either, not with labor force participation in retreat. So they wait. Say little. Hope the next report is cleaner.

Markets are still pretending this is fine. September rate cut odds are floating around, like nothing’s changed. One more hot wage number, and that fantasy gets pushed into December, maybe beyond.

This wasn’t a recession report. But it wasn’t healthy either. It’s what comes before things turn. The outer edges are already softening. Manufacturing. Temp work. Public sector employment. The center will follow. It always does.

None of this will show up on cable news. You’ll hear about the topline number and the steady jobless rate. No one will talk about 600,000 full-time jobs vanishing in a month. Or half a million workers walking away entirely.

But that’s where the real story is. That’s where it always is.