The U.S. economy added 559,000 jobs in May, staving off fears of a slowdown but falling short of the blockbuster recovery numbers that had once been expected to accompany growing vaccinations and an easing pandemic.
President Biden hailed the report, calling the numbers “great news,” while noting the first four months of his presidency had seen more than two million jobs added back to the economy.
Yet as Republicans blasted angry statements declaring the numbers a disappointment and blaming federal unemployment benefits for keeping workers away from jobs, the White House appeared to soften its stance on unemployment benefits Friday. Press secretary Jen Psaki said GOP governors “have every right” to end enhanced federal benefits for their states as they see fit, which comes after weeks of White House officials mostly defending unemployment benefits.
Indeed, economic head winds abound. Supply chain shortages of goods like semiconductors are dampening manufacturing activity for car companies and other producers. Inflation, reflected in price increases in lumber and steel, as well as staples like poultry, meat and even toilet paper, are weighing on companies and consumers.
Plus, many businesses in industries like food service and construction continue reporting significant challenges finding applicants for open positions.
The labor force bottleneck stems from a mix of pandemic problems that include ongoing child-care issues, with some schools yet to fully reopen, and lingering health concerns for older workers and others, according to most economists. Also, some sectors like travel and performance arts have yet to mount a substantial recovery.
Meanwhile, wages continue to rise, another sign of what employers say is a shortage of workers in a surprisingly tight jobs market. In restaurants and bars, wages for nonmanagerial workers rose 6.8 percent over the three months ending in April, the fastest increase on record dating back to 1990.
Business owners continue to report difficulty filling open positions. Nearly half — 48 percent — of all small businesses surveyed by the National Federation of Independent Business reported unfilled job openings, a record high for the business group and 26 points higher than the decades-long average of 22 percent.
“Small business owners are struggling at record levels trying to get workers back in open positions,” NFIB’s chief economist, Bill Dunkelberg, said in a statement. “Owners are offering higher wages to try to remedy the labor shortage problem. Ultimately, higher labor costs are being passed on to customers in higher selling prices.”
Economists interviewed by The Washington Post characterized the report as a positive one but cautioned there were signs that a tight labor market was weighing on the rehiring push.
“The shortage story is coming through very clearly what you’re seeing in wages and participation,” said Andrew Hollenhorst, chief U.S. economist for Citi. “That clearly is holding back hiring.”
Drew Matus, chief market strategist for MetLife Investment Management, said the loss of 73,000 workers from food and beverage retail stores over the past two months was a sign that even some of the jobs created during the pandemic — like curbside delivery at a grocery or liquor store — were going away as business returned to something closer to the previous norm.
The participation rate of teens in the labor force, which had been unusually high in recent months, ticked down nearly a full percentage point for the month, a sign that teens were getting boxed out of the market as wages rose and employers sought more experienced staff, Matus said.
“You’ve had such a big disruption. It’s going to take time to sort out where these people can go and find work,” he said. “Not everything is reopen, and some things are gone for good and those people who worked in those places have to find other work.”
Aaron Sojourner, a former White House economist who served in both the Obama and Trump administrations, said a report adding more than half a of million jobs is good news for the economy and should put to bed the worst fears about the labor shortage.
“Hiring takes time,” said Sojourner, who noted that a sizable part of the workforce is still not vaccinated. “A lot has changed in people’s lives, a lot has changed in how business is done, and it’s not just snap your fingers and everybody finds their place in the labor market.”
Economists and analysts had been forecasting a robust period of growth in the labor market for the spring for months, as vaccine distribution increased, the weather warmed and coronavirus caseloads fell.
But a picture is emerging of a slower economic recovery, with unforeseen complications from a public health crisis that was like no other, before a speedy return to full employment.
Hollenhorst said a sense of normalcy may not appear in the jobs report until early October, as the September jobs data should reflect broader reopenings of full-time, in-person school, paving the way for more parents to return to work.
In May, the job gains were driven by strong growth at restaurants, bars and other food service establishments, which added 186,000 workers in the month.
Amusements, gambling and recreation, as well as hotels and accommodations, also saw strong gains, adding 58,000 and 35,000 jobs respectively. Those sectors have been the subject of intense focus on whether a shortage of workers or other pandemic-related issues have been holding back growth.
In schools, employment rose by 144,000 as in-person learning resumed across the country, including 103,000 in state and local schools and 41,000 in private ones. Health care added 46,000 jobs. The manufacturing and transportation and warehousing sectors both rose by 23,000 positions.
Construction sustained the biggest loss as a sector, shedding 20,000 jobs for the month, the Bureau of Labor Statistics said.
Overall wages increased an average of 15 cents per hour to $30.33, following an increase of 21 cents in April. In the food service sector, those gains have been particularly pronounced.
The pool of people who have been unemployed for more than six months declined by 431,000 in May but remains well above its pre-pandemic levels.
The May report follows a disappointing month in April, when the economy added what federal statisticians initially tallied as 266,000 jobs and later revised upward slightly to 278,000.
At the pace of job gains in May, the economy would not fully recover the jobs it lost during the pandemic before July 2022.
Andrew Van Dam, Jeff Stein and Alyssa Fowers contributed to this report.
A previous version of this story said that at the current pace of job gains, the economy would not fully recover the jobs lost during the pandemic before July 2023. At the current pace, the jobs recovery would take until July 2022.