‘Hard to love it’: Modest job gains leave lingering doubts about recovery
“This is a lukewarm report that will only serve to stoke fears about labor market shortages,” Aberdeen Standard Investments Deputy Chief Economist James McCann said in a note to clients on Friday.
The figure will provide some relief to the White House after the April report, but it’s well short of the pace predicted by many economists earlier this year. If these modest gains keep up, it will take far longer to get the economy back to where it was before the virus hit than many economists expected.
“It’s hard to hate this report, but it’s also hard to love it,” wrote Nick Bunker, economic research director at Indeed. “Adding over a half-million jobs in one month is a solid pace of growth, but we will need to keep up this tempo for quite some time to get back to a semblance of the pre-pandemic labor market.“
President Joe Biden, speaking from Rehoboth Beach, Del., called the report “great news for our economy and our recovery.” He also made the case for his proposed $4 trillion in expanded federal spending over the next decade on infrastructure and family-assistance programs.
“Now is the time to build on the foundation we laid,” Biden said. “Progress is undeniable; it is not assured.”
Republicans had a different take, ripping the employment report as soft and saying Biden’s agenda was failing.
“Even with dumbed-down jobs expectations based on April’s disastrous report, here is another jobs report falling well short of expectations,” Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, said in a statement. “It’s time for President Biden to abandon his attack on American jobs, his tax increases, his anti-growth regulations and his obsession with more emergency spending and endless government checks.”
The Labor Department report, which saw the unemployment rate drop to 5.8 percent from 6.1 percent, followed a gain of just 278,000 net jobs in April against expectations of about 1 million for that month. Economists had forecast a net gain of 675,000 jobs for May.
But despite the overall increase in May, the data below the topline number could be a worrying sign as employers complain about how hard it is to hire workers.
The jobless rate dropped in part because the labor force shrank by 53,000. The labor force participation rate, which measures how many people are currently working or actively seeking work, also ticked down slightly from 61.7 percent to 61.6 percent.
Unemployment among women and Black workers, who have faced child-care issues that make returning to a job outside the home difficult, also saw little improvement. The coronavirus has killed nearly 600,000 Americans and initially ripped away about 22 million jobs, hitting women and minority workers especially hard.
As the partisan fight over an infrastructure plan continues, the faster pace of job creation will offer a window for Republicans to say that the federal government does not need to spend a great deal more than the trillions of dollars already pumped into the economy since the virus swept through the country with startling speed last March.
Partisan arguments aside, the true picture of the economy remains clouded. The U.S is still more than 7 million jobs short of where it was before Covid hit and even further behind where it would be if the virus had never occurred at all.
“Another disappointing rise in payrolls in May,” Rubeela Farooqi, chief U.S. economist a High Frequency Economics, said in a note to clients. “The jobs deficit, at 7.6 million, is still substantial and job growth remains surprisingly sluggish in an economy that is no longer facing capacity constraints.”
Economists suggest it will take at least a couple of more months — and a higher rate of vaccinations in the U.S. — to determine how the shape of the U.S. workforce has changed and whether enhanced federal unemployment assistance really is creating the shortage of workers that many businesses are complaining about.
At least 25 states are already planning to end the added jobless benefits, even though the extra $300 per week in aid from the federal government ends in September.
“There is a long list of reasons why employers are having difficulty filling open job positions, and while the extra unemployment insurance benefits is on the list, it is towards the bottom,” said Mark Zandi, chief economist at Moody’s Analytics. “At the top of the list is simply that the economy has reopened very quickly as the pandemic winds down, and it is taking some time for workers that permanently lost their previous job to settle on a new one.”
Economists say many workers remain skittish about going back into public-facing jobs, particularly in the service industry.
Federal health authorities peeled back most masking requirements for fully vaccinated individuals on May 13, prompting many states to ease restrictions and permitting businesses to fully restore their operations.
The leisure and hospitality industry, especially food services and drinking places, made up a large share of the job gains last month.
But, those industries were slammed by the state stay-at-home orders and health restrictions put in place over the past year, and are still down 2.5 million jobs since the start of the pandemic.
“Today’s report is somewhat disappointing. Even though the top line numbers seem relatively healthy and in fact would be a very healthy report in normal times, this is not what we want to see if we’re back to where we were before the pandemic quickly,” said Daniel Zhao, senior economist at Glassdoor. “This shows that the labor market is tapping lightly on the accelerator, but not yet ready to floor it towards full recovery.”
