The US added 559,000 jobs last month — fewer than the 671,000 expected by economists — as Americans continued to emerge from the pandemic but businesses struggle to hire new workers, the feds said Friday.
The unemployment rate ticked down to 5.8 percent from 6.1 percent in the month prior, according to Friday’s much-anticipated jobs report from the Bureau of Labor Statistics. That’s still far higher than the 50-year low of 3.5 percent reported in February before the pandemic gutted the economy.
Economists expected to see the unemployment rate fall to 5.9 percent.
After the release of the disappointing data, President Joe Biden acknowledged that, “As we continue this recovery, we’re going to hit some bumps along the way.”
He also confirmed that the federal unemployment program, which provides an extra $300 in benefits every week and has been blamed for keeping workers homebound, will end in September.
It’s the second month in a row that new jobs added has fallen short of expectations, though May was much a narrower miss than in April, when the economy added just 266,000 jobs, short of the 1 million expected. The feds on Friday revised April’s total up slightly to 278,000 jobs added.
“The jobs numbers were a surprise again this month, and just like last month, they were lower than expected,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
Mark Hamrick, senior economic analyst at Bankrate, noted that there are a lot of kinks in the economy right now, making for unpredictable data through this summer. A nationwide shortage of workers is likely holding back some of the economic recovery as companies are forced to raise wages, with many still unable to staff up enough to meet surging demand, he noted.
The new federal data follows a report Thursday from payroll processing firm ADP that showed private-sector hiring picked up at its fastest pace in almost a year in May as companies hired almost 980,000 workers.
Taken together, both sets of data offer some hope that the labor crunch is easing, but it also shows that the labor market recovery is falling short of previous hopes for a rapid rebound this spring.
Notably, the labor force participation rate ticked lower to 61.6 percent as the size of the group fell by 53,000 with more than 100 million American on the sidelines.
Curt Long, The National Association of Federally-Insured Credit Unions’ chief economist, noted that women made up the bulk of May’s job gains, which could be a sign that child-care concerns, which have been blamed for the labor shortage, may be easing.
“As you would expect, it seems like a lot of the child-care constraints are starting to recede a little bit,” he said.
The report, while modestly positive, signals a lengthy recovery of the job market still to come, Long said.
By sector, leisure and hospitality, the part of the economy hit hardest by the pandemic and subsequent government restrictions, saw the most gains, adding 292,000 jobs, with most coming from restaurants and bars.
Education also saw big gains, adding 144,000 across the board. Health care and social assistance picked up 46,000 jobs, while information services added 29,000, and manufacturing gained 23,000.
Transportation and warehousing added 23,000 while wholesale trade picked up 20,000 and professional and business services gained 35,000.
Notably, construction lost 20,000 positions while retail also was down 6,000.
There’s still a roughly 7-million-job gap to pre-pandemic levels.
Some business owners and Republican politicians have blamed the labor shortage on the federal program that provides an extra $300 in additional unemployment benefits every week.
Other factors, such as fears of COVID-19 and child-care concerns, are also likely keeping people home, economists caution.
But critics of the program say the extra benefits add up to more than what businesses can afford to pay people, particularly for entry level jobs.
Now, 25 states are looking to lure workers back into the labor market by withdrawing early from the federal program, which is set to expire after Labor Day.
Long, the economist from the NAFCU, noted that it’s possible that announcements that states will be ending the extra benefits spurred some of May’s hiring.
And with companies competing for workers, wages are ticking upward.
Wages rose 2 percent in May from last year, Friday’s report said, substantially higher than the 0.4 percent year-over-year gains reported in April.
On top of the labor shortage, the economy is also grappling with a spike in costs that’s ripping across industries and driving prices up all throughout the country.
Federal officials have voiced hope that the inflation is only temporary, but economists have increasingly said it may be here to stay at least through the summer.
“Overall, today’s report does provide progress in the right direction, but it also raises uncertainty around the inflation debate with wage pressures beginning to creep into the labor market,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.
He added: “employers may need to offer up more incentives to entice workers to fill the record number of job openings that are out there.”