Unemployment drops to 5.8% as productivity growth erases inflation fears
May’s jobs report was a little weaker than expected, with the economy adding 559,000 jobs. On the household side, the unemployment rate fell 0.3 percentage point to 5.8%. While this figure is still high by any reasonable measure, it should be noted that the unemployment rate did not reach this low level after the Great Recession until October 2014.
The employment-to-population ratio (EPOP) climbed to 58.0%, 3.1 percentage points below the pre-pandemic level. By this measure, the gender differences in the pandemic hit have largely disappeared, women’s EPOP for May was 53.1%, down 2.3 percentage points from its 2019 average. For men, the May EPOP was 63.4%, down 3.2 percentage points from its annual average of 66.6% in 2019. However, in paid employment, the share of women was 49.8% in May, up from 50.0% before the pandemic.
(It is important to note that states that ended UI supplements would likely not affect the May data. The termination did not take effect until June, the benchmark of the survey. is May 12.)
Private sector performance has been strong, as governments delay rehire workers
The private sector accounted for 492,000 of job growth in May, while state and local governments added just 78,000 workers in the month (the federal government lost 11,000 jobs). State and local employment is still 1,191,000 below its pre-pandemic level, with the vast majority of that gap being in education. With the regular school year ending this month, pandemic closures will be less of a problem in June, but all schools will likely be open for classroom instruction again in the fall.
The private sector has lost 6,462,000 jobs since February 2020. At the rate of employment growth in May, it will take just over 13 months to close the gap.
Restaurants are the biggest source of job shortages
In absolute numbers, restaurants make up most of that deficit, with employment still down 1,480,000 from pre-pandemic levels, after adding 186,000 jobs in May. While many employers say they aren’t hiring because they can’t find workers, the impact of this shortage is unclear. Wages have increased rapidly for unsupervised workers in the industry, an annual rate of 22.2% comparing the average of the past three months (March, April and May) to the previous three months (December, January and February), but the average workweek actually fell slightly in May, from 25.3 hours to 25.1 hours.
On the positive side, the index of aggregate hours in industry is still 12.4% below its pre-recession level. With restaurant sales likely to exceed their pre-pandemic level in May, this means a huge productivity boost. This is true more generally, as the overall aggregate hours index for May was 3.6% below the February level, although it is virtually certain that production will exceed pre-pandemic levels over the course of the year. of the quarter.
Big job gains in the most struggling sectors
The healthcare sector, which lost 508,000 jobs from before the pandemic, added 22,500 jobs in May. Nursing facilities, which lost 202,000 jobs, added just 1,000 in May, after losing 17,700 in April. This is a sector where weak and poor working conditions can make it difficult to attract workers.
Hotels, which are down 526,000 jobs, added 34,600 jobs in May. The other services category, which includes industries such as barber shops and dry cleaners and down 353,000 jobs, added 10,000 jobs in May. The retail sector, which is down 411,000 jobs, actually lost 5,800 jobs in May. This is another sector where it seems that there have been strong productivity gains. The film industry, which is among the hardest hit in terms of percentage, down 157,000 jobs or 35.6%, added 13,900 jobs in May.
Construction and manufacturing Coping with shortages
Construction lost 20,000 jobs in May after losing 5,000 in April. This is probably due to temporary shortages of building materials, especially lumber. Manufacturing created 23,000 jobs, offsetting most of the job losses in April, as automakers appear to find ways to deal with the semiconductor shortage.
The recovery continues to benefit more educated workers
The unemployment rate for university graduates fell 0.3 percentage points to 3.2% in May. It is down 0.8 percentage point since the start of the year. In contrast, the unemployment rate for high school graduates fell only 0.1 percentage point to 6.8 percent. It has fallen 0.3 percentage points since January.
Unemployment among black teens hits record high
The unemployment rate for black teens fell to 12.1% in May, by far the lowest level on record. This data is very erratic, so we can see a big jump in the coming months, but it seems to indicate that they are doing relatively well in the current job market.
Overall unemployment for blacks and Hispanics both fell 0.6 percentage points in May, to 9.1% and 7.3%, respectively. The unemployment rate for Asian Americans is still a little higher than that of whites, 5.5% compared to 5.1% for whites. It was slightly lower before the recession.
Long-term unemployment decreases and quit rate increases slightly
The share of long-term unemployed (over 26 weeks) fell from 43.0% to 40.9% in May. It is still very high; a more normal rate would be in adolescents. The percentage of unemployment due to voluntary departures is only 8.4%. That was over 14.0 percent before the pandemic, indicating that workers still don’t feel good about their prospects in the job market.
Start as a freelance
The number of self-employed has increased sharply over the past three months, with a three-month average of 9,843,000 over 300,000 above the annual average for 2019. This data is erratic, but it is possible that many people find ways to work from home for themselves instead of going back to work.
Generally strong report
The number of jobs was still a little lower than expected in May, but much of that continues to be due to schools not reopening. With regard to employers having difficulty in hiring workers, there is some evidence, notably the relatively rapid growth in wages of production workers (i.e. an annual rate of 4.5%, comparing the last three months to the previous three months.) On the other hand, the slight decrease in average weekly hours is not compatible with a shortage.
The positive side of weaker than expected job growth is that it means productivity growth is very strong. With production now exceeding pre-pandemic levels, but still much lower employment, that means we are getting a lot more production per hour. Strong productivity growth should eliminate any fear of inflation.