- Job growth misses expectations as unemployment rate beats…
- Leisure and hospitality sector continues to lead rebound…
- Moderate pace of growth gives Fed room to remain dovish…
U.S. job growth picked back up in May but missed expectations for the second month in a row.
The Labor Department reported the economy added 559,000 last month versus analysts’ expectations for around 670,000.
But the unemployment rate fell to 5.8% from 6.1% which beat economists’ expectations of 5.9%.
President Biden touted the job growth in a tweet saying, “Today’s jobs report shows historic progress for American families and the American economy. We added 559,000 jobs in May, created a record two million jobs in our first four months, and unemployment is at its lowest level since the pandemic started.”
But Republicans highlighted the miss on the headline number, with Arizona Congressman Andy Biggs saying in a tweet, “Biden misses the mark again. What do you expect when you pay people not to work?”
The report also included upward revisions for the previous two months.
April’s big miss was revised higher by 12,000 to show the U.S. economy added 278,000 jobs — still sharply lower than the nearly 1 million forecast.
March’s data was revised to show an addition of 785,000 jobs versus the previously reported 770,000.
Breaking Down the Job Growth
Image credit: New Africa/Shutterstock.com
The hospitality industry continued to lead job growth in May after those businesses were hit the hardest by pandemic restrictions in 2020.
But employment in that sector remains 2.5 million jobs short from its pre-pandemic level in February 2020.
The breakdown by sector is as follows:
- Leisure and hospitality +292,000, led by food services and drinking places
- Public and private education +144,000
- Health care and social assistance +46,000
- Information services +29,000
- Manufacturing +23,000
- Transportation and warehousing +23,000
- Wholesale trade +20,000
- Construction -20,000
- Professional and business services +35,000
- Retail trade -6,000
The report also showed wages continuing to rise:
“Average hourly earnings for all employees on private nonfarm payrolls increased by 15 cents to $30.33 in May, following an increase of 21 cents in April. Average hourly earnings of private-sector production and nonsupervisory employees rose by 14 cents to $25.60 in May, following an increase of 19 cents in April.”
Overall, average hourly earnings were up 2% year-over-year in May.
The Labor Department suggested that increase may be due to rising demand for workers amid the current labor shortage in the U.S. economy.
A recent survey by the U.S. Chamber of Commerce shows a lack of available workers is the biggest problem facing employers across the country.
90.5% of respondents to that survey said that was their top challenge in finding workers while just 44.9% cited issues related to COVID-19.
67.3% of respondents also said it is “very difficult” to find workers in their area.
Chamber of Commerce President and CEO Suzanne Clark said, “The worker shortage is real—and it’s getting worse by the day.”
The labor force participation rate — which measures the percentage of the U.S. population that is either working or actively looking for work — dipped slightly to 61.6% with more than 100 million Americans remaining on the sidelines.
Market Reaction
Wall Street rose following the release of the jobs report as the measured pace of job growth gives the Federal Reserve room to maintain its dovish policies that have propped up the market during the pandemic.
The U.S. economy is still about 7 million jobs short of pre-pandemic levels with the unemployment rate far above the 3.5% in February 2020.
Recent inflation pressures have prompted concern the Fed may be forced to tighten policy earlier than planned but today’s report aligns with the bank’s message.
The Central Bank has pushed back against those inflation concerns saying the upward trend is only temporary.
In August 2020 the Fed adopted a new policy to prioritize full recovery in the labor market over inflation.
If the pace of the labor market recovery remains on track with the modest growth seen in May, quantitative easing could be here to stay and the market will likely remain on its upward trend.
Featured Cover image credit: Zerbor/Shutterstock.com
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