The US job market continued its recovery in May, as the unemployment rate ticked down to 5.8% from 6.1% in April, and the economy added 559,000 jobs. However, these signs of improvement were not quite as good as what economists forecasted.
The US recently hit an important milestone this month, announcing that over half of Americans have received at least one dose of the COVID-19 vaccine. Although these rates have started to taper off, COVID-19 restrictions continue to be lifted and more of the economy has opened up. Let’s take a closer look at how all of this impacted employment during the month of May.JobGet Unemployment Report May 2021 v4-converted
After the disappointing job numbers for April, when the unemployment rate actually increased slightly, and the economy added only 278,000 jobs, May’s numbers look much more promising, albeit short of expectations. The leisure and hospitality sector continued to see large gains in jobs, the number of long-term unemployed workers decreased, and average hourly wages increased by 0.5% from last month.
Amongst these bright spots, several obstacles are hindering the US’s path to a full recovery. Some employers report having trouble finding workers to fill positions, and the US labor force declined by 53,000, giving some evidence to claims of a labor shortage.
Additionally, the labor force participation rate remains 1.7 percentage points below its pre-pandemic level and is little changed since last summer. If the economy follows the path of previous recessions, we should expect a long recovery. However, increased vaccinations and school and daycare reopenings should help and provide some hope for the coming summer months.
In May, the number of unemployed workers, temporary layoffs, and permanent job losses all fell. Additionally, the number of newly unemployed workers and long-term unemployed workers both decreased. After steadily climbing since last spring, the number of long-term unemployed workers appears to finally be trending downwards. This marks an important milestone—long-term unemployment is especially risky financially for households, and long-term unemployed workers tend to have more difficulty finding jobs.
Several demographic groups saw declines in their unemployment rates. The unemployment rate for teens clocked in at 9.6%, down from 12.3% in April. Women’s unemployment currently stands at 5.4%, and men’s unemployment rate is 5.9% (down fraaom 5.6% and 6.1%, respectively, in April). The Hispanic, White, Black, and Asian population all experienced a decline in their unemployment rates from last month.
Some occupations have seen significant drops in their unemployment rates from a year ago. The unemployment rate among service occupations has fallen by 16 percentage points to 7.6%. The unemployment rate for sales & office occupations is now 8.1%, down from 13.9% last May. Natural resources, construction, and maintenance occupations saw their unemployment rate fall to 6.6%, compared to 13.2% one year ago. Transportation and materials moving occupations have also recovered well—the unemployment rate among these occupations is 8.9%, well below the 18.3% seen last year.
Leisure and Hospitality saw a sizable increase in employment this month, gaining 292,000 jobs. Government and Healthcare and Social Assistance also saw sizable increases. Several industries—Financial Activities, Retail Trade, and Construction—lost jobs compared to April.
Average hourly wages increased again in May, this time by 0.5%. Compared to May of 2020, average hourly wages are 2% higher. Leisure and Hospitality workers are doing better than most—they saw their average hourly wages go up by 1.29% from last month and are now 3.7% higher than a year ago. Increased wages gives credence to labor shortage claims. Businesses, especially in some industries like leisure and hospitality, are raising pay to attract workers.
May’s decreased unemployment rate can be explained by the 559,000 increase in jobs and the decrease in the labor force by 53,000. Overall, the labor force participation rate is 1.7 percentage points lower than pre-pandemic levels. Both men and women have seen a decrease in their labor force participation rates.
Women were disproportionately hurt in the early stages of the pandemic due to both their overrepresentation in the most impacted industries and school/daycare closures. However, in the last few months, women have made larger gains in their employment relative to men. The continued opening of the economy, including schools and daycares, will continue to help.
The Consumer Price Index (CPI) is used to measure how the prices of consumer goods and services change over time. The CPI increased by 0.6% overall from April to May, following an increase of 0.8% from March to April. The May increase was higher than forecasted and translates to a 5% increase year over year. While the jobs numbers for May are decent, they are not too strong for the Federal Reserve to start tapering its easy-money policies. The jobs numbers for May suggest inflation is transitory.
The US continues its recovery from the deep dive it took last spring. The economy gained a sizable number of jobs, and the unemployment rate ticked down. Many industries and demographic groups have made great strides in their recoveries. However, signs of a labor shortage, stagnant labor force participation rates, and inflation signals are all things to keep an eye on.
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