- Hiring picked up in May after a disappointing April, as nonfarm payrolls rose 559k jobs. Still, that was below market expectations for around 670k. The unemployment rate fell to 5.8%, from 6.1% in April.
- As of May, nonfarm payroll employment is down by 7.6 million, or 5.0%from its pre-pandemic level in February 2020. On net, revisions to March and April added an additional 27k jobs.
- Once again, leisure and hospitality led the way on job gains, adding 292k positions. Two thirds of those jobs were in restaurants and bars, which added back 187k workers. Leisure and hospitality employment is still down 15%, or 2.5 million jobs, versus pre-pandemic levels. Hiring was also up in local government education (+53k), state government education (+50k) and private education (+41k), reflecting the resumption of in-person learning. Health care and social assistance also had decent job growth (+46k) in May, with a big jump up in employment in child care services (+18k).
- On the goods side of the economy, manufacturing employment rose 23k in May. However, construction shed 20k positions, driven by nonresidential specialty trade contractors (-17k). Retail trade also shed workers for the second consecutive month (-6k), as food and beverage stores reduced staffing for the third consecutive month.
- Average hourly earnings was up 3.7% versus a year ago in May, and while this measure is affected by compositional shifts, there is still evidence wage growth is stronger than would be expected given high unemployment.
- The drop in the unemployment rate was driven by a smaller 444k gain in household employment, but the labor force fell slightly (-53k). Therefore, labor force participation edged down 0.1 percentage points to 61.6% in May, and has made little improvement since June 2020.
- In another sign that work life is gradually returning to normal, the share of people teleworking fell to 16.6% in May down from 18.3% in April. The number of people not in the labor force due to the pandemic also declined to 2.5 million, from 2.8 million in April.
Key Implications
- That is more like it. Economic data has been fairly upbeat in recent weeks, and hiring appears to be moving back in line. With over half of the U.S. fully vaccinated, the economy is re-opening, people are on the move and businesses are hiring to ramp up.
- Still, there’s a long way to go and without a further acceleration it will take another 14 months to regain all the jobs lost in the pandemic. Reports of employers difficulty in finding workers suggests that supply constraints may also be an issue. In addition to relatively generous unemployment benefits, many American workers face pandemic-related challenges in returning to in-person work including ongoing health risks and a lack of child care.
- Given these challenges, hiring could take longer to ramp up than initially expected, with more growth coming in the fall as more schools reopen and pandemic unemployment benefits expire. Higher wages are also likely to pull more workers off the sidelines.
