The US economy continues to throw curveballs, and the May employment report is the latest example.
Employers added 272,000 jobs last month, the Labor Department reported on Friday, higher than economists expected as hiring slowed. This was up from the 232,000-job average over the previous 12 months, changing the picture of a relaxed economy to a more sustainable one.
Most of the Federal Reserve, which meets next week and again in July, wages rose 4.1 percent from a year ago – a sign that inflation has not yet been overcome.
“For those who might have thought they would see a July rate cut, that door is largely closed,” said Beth Ann Bovino, chief U.S. economist for U.S. Bank. Although wage gains are good for workers, he notes, persistent price increases are undermining their power.
Shares fell shortly after this report was published, before regaining ground to trade slightly higher. Government bond yields, which track expectations for the Fed’s interest rate moves, rose sharply and remained up during the trading day.
But the picture of the fast-moving labor market is also unclear. In another part of the report, the unemployment rate rose to 4 percent, the highest point since January 2022. The number was drawn from a household survey, which showed no growth in the labor force over the past year and an increase in part-time employment. has moved to a full-time position.
Data from employers that produce job growth numbers tend to be more reliable, but recent household surveys are more consistent with other indicators. Retail sales have been flat. Gross domestic product fell sharply in the first quarter. The number of job vacancies is less than since 2021.
That’s why most economists expect labor force growth to continue to slow, and the unemployment rate to rise again this year.
“Other than healthcare, we don’t see the power of the data,” said Parul Jain, chief investment strategist with MacroFin Analytics. “Growth in 2024 will not be very strong, consumers are retreating, and we expect that disposable income will also be affected.”
Health care has been the backbone of hiring for the past two and a half years, providing 18.6 percent of the jobs added. An aging population has driven demand, and increased insurance coverage through the Affordable Care Act has given access to more care.
On the other hand, leisure and hospitality – which have been hit harder than other sectors by the Covid-19 lockdown – took until April to reach the level of employment of February 2020. Forecasts of a record summer travel season could push the figure even higher in the coming months. come, although few expect job growth to exceed last year’s numbers.
United Airlines, for example, announced this week that it will add 10,000 jobs this year, down from 16,000 in 2023 and 15,000 the year before, as it transitions from pandemic recovery to organic growth.
One reason job growth exceeded forecasts was the government workforce, which has recovered quickly but is expected to decline as federal pandemic relief funds dry up. The sector even added 43,000 jobs in May. But the calm may still be there.
It has been seen Peter Finch, superintendent of the West Valley School District, which is located outside of Yakima, Wash. Funding under the American Rescue Plan Act has allowed them to add staff members like mental health counselors and tutors, but now they are no longer filling positions as leavers.
“It’s a difficult time in education,” Dr. Finch said. “If you have less resources, you can’t deliver the same service as in the past – that’s the reality.”
The impressive labor market has been supported by a rebound in legal immigration and by the influx of millions of migrants with temporary status, many of whom have found work with the help of expedited work permits. According to calculations by the WE Upjohn Institute for Employment Research, hiring has fallen significantly for native-born workers, but has been held for those born outside the country.
That impact may disappear as President Biden’s executive order restricting asylum seekers at the southern border takes effect.
One good sign on the labor force: The share of people between the ages of 25 and 54 who are working or looking for work reached its highest level since early 2002, at 83.6 percent. Women in that age group have led the way, and in May reached the highest participation rate on record.
The picture is not as rosy for adults in their early 20s, whose participation rate dropped in May. As employers retain workers and fewer leave voluntarily, there is less room for those with little work experience, who are already looking for work at lower rates.
Workers over 55 have also not returned to the workforce in large numbers – the participation rate remains two percentage points below pre-pandemic levels. But some people have withdrawn because costs have risen and pension funds have not been able to cover them.
Take John Refoy, 67, who retired from the Navy after 33 years as a maintenance technician. He moved to Flagstaff, Ariz., to be closer to his sister during the pandemic. When rent and food costs rise – and the Subaru Outback costs more than expected – Social Security and civil service pensions no longer pay the bills. So late last year, he applied for a job at Walmart.
Working full-time in the bakery and deli department — a job that now pays $20 an hour, after years of wage increases — has doubled.
“It makes all the difference,” Mr. Refoy said. He will probably leave his job next year when the car is paid off, he said, but he enjoys social interaction. “It’s a great group of people,” he added, “and it’s really helpful for me to get back to work.”
Mr. Biden chose to focus on the project-making side of the report. “On my watch, 15.6 million more Americans have the dignity and respect that comes with a job,” he said in a press release. But amid concerns about stubborn inflation, Mr Biden also emphasized efforts to reduce prices.
The labor market path heading into the fall carries deep implications for the upcoming election. And while most forecasters see long-term growth slowing, the likelihood of an outright recession is as low as it was a few years ago, barring some external event like an escalation of war or an unexpected financial crisis.
“We’re probably walking somewhere where we want to be in a constant equilibrium,” said Brad Hershbein, deputy director of research at the Upjohn Institute, “where things are generally very abundant, inflation continues to fall, the labor market returns.” to somewhere between 150,000 and 175,000 jobs per month.
