The economy added 390,000. However, the unemployment rate remained at 3.6 percent for the third consecutive monthly month. The May report clearly showed that the labor market is stabilizing, with wage growth slowing.
The annualized rate to wage growth in comparison of the last three months (March-April-and-May) with the previous three months, December-January-and February was 4.3 per cent, which is less than the 5.2 per cent year-over-2018 increase. This is slightly lower than the February 2019 peak rate of 3.6 percent year over year. This means that if we are concerned about underlying inflation rather than supply shocks, most of the Fed’s work has been done.
Voluntary Quits Edges Contribute to Unemployment
The percentage of unemployment caused by voluntary quits fell to 12.8 percent. This is a sign workers believe they have less bargaining ability. It reached 15.1 percent in February. It also reached 15.0 percent in February 2000, just before the pandemic. This is not a market where workers feel completely comfortable quitting their job.
Hours are also stable
Employers increased the average workweek length to 35 hours in January 2021, a peak reached earlier in the recovery from an average of 34.4 hour per year in 2019. This is likely due to difficulty in hiring workers. For the last three months, the average workweek has been 34.6 hours. This is consistent with the fact that most employers don’t have much difficulty hiring workers.
Widespread Slowdown in Wage Growth
The lower end of the labor force has seen the fastest wage growth during the recovery, but there is a slowdown. The annual rate of production and nonsupervisory workers was 5.1%, but this was down from 6.5% year-over-year when you compare wage growth over the past three months with the three prior months. It was 9.5% in hotels and restaurants, which is down from 11.8% year-over-year.
Private Sector Reaches Pre-Pandemic Employment Level Nearly as Fast as the Public Sector
In May, the private sector added 333,000 jobs, a drop of just 207,000 from its prepandemic peak. It will likely surpass this threshold by June.
There are many sectors that offer job opportunities
May saw 36,000 construction jobs added, which puts its employment at 40,000 more than the pre-pandemic level.
Manufacturing added 18,000 jobs in may, leaving its employment level just 17,000 lower than pre-pandemic. In May, trucking and air transportation added 5,700 and 13,300 jobs respectively, leaving their employment levels at 6.3 percent and 4.3%, respectively, above the pre-pandemic levels.
Low-paying Child Care Centers, Nursing Homes, and Child Care Centers Still Struggle for Workers
In May, 1,300 nursing homes and 1,500 childcare centers added 1,300 jobs. Both sectors still have a lower employment rate than pre-pandemic.
84,000 jobs added to the leisure and hospitality sector
The worst hit sector was the leisure and hospitality. While it is adding jobs at an alarming rate, the employment level is still well below pre-pandemic levels. The arts and entertainment industry added 16,200 jobs, which is down 211,000 jobs from pre-pandemic levels. Restaurants and hotels added 21,400 jobs and 46,100, respectively. These sectors have lost 383,000 and 751,000 jobs since the start of the pandemic. It is worth noting, however, that real restaurant sales are much higher than the pre-pandemic level.
Higher Education in the State and Local Governments has the largest annual job gain
In May, 50,700 new jobs were created by both the state and local governments in education. This is the largest increase since July 2021. Public education still has a 280,500-person employment rate that is below the pre-pandemic level. Schools have had difficulty attracting students. This shortfall can be reversed with the May jump, which is a significant step in the right direction.
May is a tough month for the retail sector.
Retail lost 60,700 jobs in May. 32,700 of these losses were in general merchandise stores. This is consistent in reports of falling demand from Target, Amazon, or other major chains. These chains are reporting a glut in merchandise and loss in pricing power so we could soon see lower prices on many items.
Participation in the Labor Force Up for Prime Age Workers
The overall labor force participation rate rose 0.1 percentage point, to 62.3 percentage percent. However, the participation rates for prime-age workers (age 25-54) increased 0.2 percentage point, to 82.6 percentage percent. This is 0.5 percentage points less than the pre-pandemic peak and above the 2019 average. This was due to a rise of 0.4 percentage points for prime-age females (the rate for males was unchanged) to 76.6%, a decrease of 0.3 percentage point from the pre-pandemic peak. Clearly, there has been no “great resignation.”
May: Self-employment rises
Both the unincorporated and incorporated self-employed saw an increase in May. It is now more than 1.1million higher than its pre-pandemic peak. In the early days of the recovery, many workers were able to find work as self-employed because they were unable get regular payroll employment. This is no longer true with unemployment at 4.0 %. This is a result of self-employment.
Another Very Positive Employment Report
The May employment report was as good as one could hope for. It showed strong job growth and normalized the labor market, which should alleviate concerns about overheating the economy and a wage-price cycle. It is clear that wage growth is slowing down, not accelerating like the wage-price spiral story would suggest.
The data also look very similar in many ways to the strong pre-pandemic period. Most measures of labor force participation and employment are at or near the pre-pandemic peaks, and higher than 2019 averages. Although payroll employment is still below its pre-pandemic level of 6%, it is important not to forget that if you add self-employment, current levels are significantly higher.