“This is a lukewarm report that will only serve to stoke fears about labor market shortages,” Aberdeen Standard Investments Deputy Chief Economist James McCann said in a note to clients on Friday.
The figure will provide some relief to the White House after the April report, but it’s well short of the pace predicted by many economists earlier this year. If these modest gains keep up, it will take far longer to get the economy back to where it was before the virus hit than many economists expected.
“It’s hard to hate this report, but it’s also hard to love it,” wrote Nick Bunker, economic research director at Indeed. “Adding over a half-million jobs in one month is a solid pace of growth, but we will need to keep up this tempo for quite some time to get back to a semblance of the pre-pandemic labor market.“
Republicans can say that the jobs number is strong enough to suggest that President Joe Biden’s push for another massive expansion in federal spending is not needed and will stoke inflation — and also that it is weak enough to demonstrate that jobless benefits are too generous.
Senior White House economic adviser Jared Bernstein rejected that idea, calling the report “historic and positive and extremely welcome” but arguing against slowing down federal assistance to the economy. “We can talk about those timing issues but you’re not there yet,” Bernstein told MSNBC. “I hear some of the calls essentially saying, ‘Why we’re making this significant progress to our goals, we should sort of cut the policy short and stop the car, pull over, get out.’ No, we have to keep going until we get there.”
The Labor Department report, which saw the unemployment rate drop to 5.8 percent from 6.1 percent, followed a gain of just 278,000 net jobs in April against expectations of about 1 million for that month.
But despite the overall gain in May, the data below the topline number could be a worrying sign as employers complain about how hard it is to hire workers.
The jobless rate dropped in part because the labor force shrank by 53,000. The labor force participation rate, which measures how many people are currently working or actively seeking work, also ticked down slightly from 61.7 percent to 61.6 percent.
Unemployment among women and Black workers, who have faced child-care issues that make returning to a job outside the home difficult, also saw little improvement.
The middling numbers will allow the White House to argue that its stimulus policies and pandemic response are reigniting the economy but that more needs to be done. The coronavirus has killed nearly 600,000 Americans and initially ripped away about 22 million jobs, hitting women and Black and Hispanic workers especially hard.
As the partisan fight over an infrastructure plan continues, the faster pace of job creation will offer a window for Republicans to say that the federal government does not need to spend a great deal more than the trillions of dollars already pumped into the economy since the virus swept through the country with startling speed last March.
Partisan arguments aside, the true picture of the U.S. economy remains clouded. The U.S is still more than 7 million jobs short of where it was before Covid hit and even further behind where it would be if the virus had never occurred at all.
“Another disappointing rise in payrolls in May,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note to clients. “The jobs deficit, at 7.6 million, is still substantial and job growth remains surprisingly sluggish in an economy that is no longer facing capacity constraints.”
Economists suggest it will take at least a couple of more months — and a higher rate of vaccinations in the U.S. — to determine how the shape of the U.S. workforce has changed and whether generous federal assistance really is creating the shortage of workers that many businesses are complaining about.
At least 25 states are already planning to end the enhanced jobless benefits, even though the extra $300 per week in assistance from the federal government ends in September.
“There is a long list of reasons why employers are having difficulty filling open job positions, and while the extra unemployment insurance benefits is on the list, it is towards the bottom,” said Mark Zandi, chief economist at Moody’s Analytics. “At the top of the list is simply that the economy has reopened very quickly as the pandemic winds down, and it is taking some time for workers that permanently lost their previous job to settle on a new one.”
Economists say many workers remain skittish about going back into public-facing jobs, particularly in the service industry.
Federal health authorities peeled back most masking requirements for fully vaccinated individuals on May 13, prompting many states to ease restrictions and permitting businesses to fully restore their operations.
The leisure and hospitality industry, especially food services and drinking places, made up a large share of the job gains last month.
But, those industries were slammed by the state stay-at-home orders and health restrictions put in place over the past year, and are still down 2.5 million jobs since the start of the pandemic.
“Today’s report is somewhat disappointing. Even though the top line numbers seem relatively healthy and in fact would be a very healthy report in normal times, this is not what we want to see if we’re back to where we were before the pandemic quickly,” said Daniel Zhao, senior economist at Glassdoor. “This shows that the labor market is tapping lightly on the accelerator, but not yet ready to floor it towards full recovery.”
