The May jobs report was yet another blockbuster with huge job gains: 390k jobs added—almost double the monthly average job gain before Covid. And job gains would have been even higher were they not restrained by tight labor supply. Job postings on ZipRecruiter rose 3% in May, with businesses hiring both to replace turnover and expand headcount, but held back by high turnover and persistent labor shortages. The report showed exactly what the Fed wants to see and contained plenty of good news for job seekers, too, who have received a confidence boost in recent months thanks to attractive hiring conditions.
Here are key takeaways from today’s report:
- Huge, broad job gains
- The labor market continued to add jobs at a breakneck speed. Before the pandemic, the economy only needed to add 110k-140k jobs per month to keep pace with population growth, but it consistently added more than 200k. Over the past year, it has sustained a pace of growth about double that, on average.
- The majority of industries contributed gains, with the diffusion index (a measure of the breadth of gains) coming in hot at 69.3.
- The private sector has now recovered 99% of the jobs lost in the pandemic; the public sector only 58%.
- Easing labor supply constraints
- Job gains would have been even higher were it not for the decline in labor force participation caused by the pandemic. Labor force participation rates have recovered for teenagers and the prime-age population, but are still almost 3.5 percentage points lower than before the pandemic for workers aged 20-24 and those over age 55.
- Labor force participation ticked upwards in May with improvements among prime-age workers and older workers.
- One reason for the improvement may be the resumption of legal immigration, now that embassies and consulates are coming back online and international travel is rebounding.
- Easing wage growth
- Overall wages grew 5.2% over the year, and wages for nonsupervisory workers grew 6.5%. 12-month wage growth slowed slightly, but accelerated for construction (5.6%), transportation (7.8%), utilities (5.9%), and information (3.4%).
- Coming in at 10.3%, year-over-year wage growth in leisure and hospitality has now been over 10% for 10 straight months. Nonsupervisory workers in that industry are experiencing particularly rapid growth of 11.8%.
- Further recovery in labor force participation is likely to take the boil off wage growth.