WASHINGTON—The Department of Labor reported today a gain of 390,000 jobs last month and that the unemployment rate remained at 3.6 percent, as did the labor force participation rate at 62 percent. Jobs numbers and related data show COVID effects receding, but still present, while inflation is beginning to bite.
Research fellow Sean Higgins said:
“The Labor Department’s report Friday that the U.S. economy gained 390,000 jobs in May shows that too many potential workers remain on the sidelines. While the gains beat economists’ expectations, the official unemployment rate remained unchanged at 3.6 percent while the labor force participation rate remained at 62 percent. That’s despite employers reporting that they’re begging to fill open positions. Employers have raised average hourly earnings for private sector nonfarm workers to $31.95, up by 10 cents in just the last month, and have increased wages overall by more than 5 percent over the last year. Many workers appear to holding out for even more to counter rising inflation, creating the specter of a wage-price spiral for the economy, if it isn’t already in one.”
Senior fellow Ryan Young said:
“Today’s labor report was similar to last month’s. Some of the below-the-headline numbers show more of what’s going on. The labor force participation rate is still about 1.1 percentage points below pre-COVID levels. In a 164 million-person workforce, that’s about 1.8 million missing workers. Today’s BLS release claims a matching 1.8 million “persons reported that they had been unable to work because their employer closed or lost a business due to the pandemic.” While those numbers are not clean fits to each other due to other factors being involved, they give an idea of the magnitude of COVID’s remaining effects. For context, that rate of COVID-related job churn is far lower than the natural job churn rate of more than a third of all jobs per year, but it’s not nothing.
“Inflation is making it difficult for workers and employers to agree on a fair price. Workers, at the very least, want their real wages to keep up with inflation. But employers, seeing rising costs everywhere, are reluctant to take on more and rising payroll. They will remain at odds until the Federal Reserve gets inflation back under control. They are starting to make the right moves, but the lag time involved means that inflation, even if it has already peaked, will distort labor markets at least into next year.”