The job market showed no signs of a cooling economy in May. US employment rose by 392,000 jobs, exceeding expectations, while the unemployment rate held steady at 3.6% for the third straight month.
The consistent combination of high job growth and low unemployment signal in the monthly employment situation report from the Bureau of Labor Statistics shows that the labor market has settled into a new normal marked by an ongoing talent shortage, presenting a wealth of opportunities for jobseekers but a challenge for employers.
Right after the report released, Lightcast Senior Economists Ron Hetrick and Rucha Vankudre went live for a discussion about their first reactions and main highlights from the new data; the 15-minute video is available here.
“These are gains, but not the type of gains we need if we’re to ease the tight labor market,” Hetrick said during the broadcast. “We have a low unemployment rate, a decent job gain, and yet we still have 11.4 million job openings. That makes life very difficult for employers.”
After ticking down in April, the labor force participation rate was up slightly in May, but did not fully recover from the earlier decline. Before the pandemic, labor force participation was at 63.4%, indicating that the economy is still missing millions of workers.
Most industries saw a sizable gain in the overall number of jobs, but retail trade stood out for losing 61,000. Half of that decline was in general merchandise stores, where inventories have been high. Earlier this week, the monthly JOLTS report showed that job openings for retail trade also dropped by about 162,000. The industry has likely hit its hiring peak—Lightcast data also show that wages are leveling off in most industries that pay less than $20 an hour, which suggests that employers are no longer willing to fill those positions at all costs.
Average hourly earnings rose by 10 cents, or 0.3%, up to $31.95 in May. The 10-cent rise is consistent with April and March and shows that wage growth is still rising steadily but its pace is decelerating, mitigating concerns about a wage-price spiral driving inflation even higher but also continuing to limit workers’ purchasing power. Earnings rose an average of 5.2% over the past year, down from 5.5% in the twelve months ending April 2022.
Lastly, the broader labor market shows no sign of the layoffs that have made headlines at a few select companies like Tesla.
“Recently there have been high-profile layoff announcements from companies that have some really big names in IT, but our data shows there’s record numbers of openings in IT,” Hetrick said. “Just because you hear of a few layoff announcements in a couple of high-profile companies, that doesn’t mean the whole economy is making a turn.”
As the labor market continues to show strong growth, competition will remain tight for businesses looking to hire, particularly in lower-wage industries. Low unemployment (and high self-employment) puts workers at an advantage, and employers will need to be smarter and continue to refine their hiring process using the best data and analysis possible.
Catch up on the rest of the conversation with our Senior Labor Economists here.