Job Gains Are Not Enough to Offset Labor Demands
Unemployment Rate Declines Month-Over-Month
The rate of US unemployment continued to decline in May, but it was not enough to offset the large number of open positions. With employers adding 559,000 jobs in May, the unemployment rate fell to 5.8%. Economists had expected employers to add 671,000 jobs. The results are an improvement from April when the unemployment rate was 6.1%. Still, there are 9.3 million Americans who are unemployed and may be available to work.
The improvements in the rate of hiring can be attributed to several factors including widespread vaccinations, easing pandemic restrictions, government stimulus checks, and a decline in the number of COVID-19 cases. That is boosting the economy and driving demand for labor.
Labor Pool Remains the Same
Despite the dip in unemployment, the number of people already working remained the same in May. That implies increases in wages and a large pool of open jobs did not drive individuals back into the workforce. The average hourly pay for private sector workers was $30.33 in May, up $0.15 cents. The wage for hourly workers increased 2% year-over-year.
Nevertheless, the percentage of adults working or looking for work declined slightly to 61.6%. It was 63.3% in February 2020. Labor shortages are expected to persist until 2022. The Federal Reserve, policymakers, and investors will be closely monitoring the labor market in the coming months and years.
Slow and Steady
There are a variety of reasons why businesses are having trouble filling open positions. Some employees are still worried about contracting COVID-19 at work, while others are facing childcare issues. Other people are still receiving pandemic unemployment assistance and are able to stay home. To counteract this, several states have announced plans to end the extra unemployment benefits before they expire while other states are offering people incentives to go back to work.
Despite these efforts, economists predict it will take several months before the imbalance between jobs and workers settles. There will likely be steady progress rather than big dips in unemployment.
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