Job creation disappointed again in May, with a spike in non-farm payrolls that would normally be viewed as a solid 559,000 but still falls short of high expectations, the Labor Department reported Friday.
According to economists polled by Dow Jones, the number of employees should rise by 671,000.
The unemployment rate fell from 6.1% to 5.8%, better than the estimate of 5.9%. An alternative measure of unemployment, which includes discouraged workers and part-time workers for economic reasons, fell to 10.2%.
The May disappointment came after April fell well below expectations, with the revised upward of 278,000 still well below the original estimate of 1 million, which was accompanied by high hopes for an economy trying to loosen its pandemic shackles.
The markets were not disappointed with Friday’s report. Stock market futures even rose, with investors betting that the measured pace of employment growth would prevent the Federal Reserve from hike rates and tighten monetary policy.
“The economists were a little too optimistic about the pace at which we are moving here. It takes a while for people to get a job, ”said Kathy Jones, Head of Fixed Income at Charles Schwab. “There is no reason for the Fed to act too fast for the stock market, so that’s good news for the bond market.”
The employment rate, cited by some Fed officials as a key gauge of work progress, rose to 58% but remained well below its pre-pandemic level of 61.1%. The labor force participation rate, another closely watched metric, fell to 61.6% as the group dropped 53,000 in size and left more than 100 million American workers on the sidelines.
Cleveland Fed President Loretta Mester said the job report was positive but still not enough to get the needle into politics.
“I see it as continued progress on the work front, which is very good news. But I’d like to see more progress, ”said CNBC’s Mester Steve Liesman during a Squawk on the Street interview.
The lack of jobs comes from employers widely citing labor shortages as a critical factor in why more hires are not being hired. Some have attributed the situation to generous unemployment benefits as well as childcare issues and ongoing coronavirus fears as barriers to filling the 8 million vacancies.
The services industry suffered the biggest blow from the pandemic lockdowns and continued to lead the way in job creation in May.
In the leisure and hospitality industry, 292,000 jobs were added, with the majority of 186,000 in restaurants and bars.
Public and private education also saw the benefits of reopening, adding a total of 144,000. Other increases came from health and social assistance (46,000), information (29,000), manufacturing (23,000), transportation and warehousing (23,000), wholesale (20,000) and professional and business services (35,000).
Construction lost 20,000 jobs while retailing also fell 6,000.
Decreasing Covid-19 cases and a persistently high pace of vaccines have led elected leaders to relax restrictions put in place to stop the virus from spreading. The economy grew 6.4% in the first quarter and is well on its way to accelerating 10.3% in the second quarter, according to the latest data from the Atlanta Federal Reserve.
But employment levels in the US are still about 7 million below pre-pandemic levels, a situation Fed officials have repeatedly cited as a justification for keeping politics loose.
“This fits in with the same narrative the market is seeing – a decent number, a relatively solid rebound and a picking economy, but which still allows the Fed to take it a little slower,” said Yung-Yu Ma, BMO’s chief investment strategist Asset management. “The job market is tight, but I don’t think we’re close to full employment.”
A notable part of the report was an acceleration in wage increases, which rose 2% y / y after rising just 0.4% in April.
Economists had largely dismissed average hourly earnings for much of the post-pandemic period due to compositional factors where the majority of new hires came from higher-income positions. With the return of more hospitality workers, the numbers are more relevant and now point to rising wage pressures.
Unemployment fell significantly across all races, with blacks and Hispanic Americans falling 0.6 percentage points to 9.1% and 7.3%, respectively.
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