Job Growth Strong, Not Spectacular - June 7, 2021

The U.S. BLS reported nonfarm payrolls rose by 559,000 in May. It’s above the 278,000 jobs added in April, but below 785,000 in March. The unemployment rate fell from 6.1% in April to a pandemic low of 5.8% in May. 

Figure 1 illustrates the sharp decline in jobs and surging jobless rate at the beginning of the pandemic, as well as the subsequent recovery.

Another look at what’s happening in the labor market is provided in Figure 2. Figure 2 is a 3-month rolling average for nonfarm payrolls, or the average number of jobs gained or lost over the last three months.

It helps smooth away volatility and statistical anomalies that sometimes crop up in the monthly data.

Figure 2 highlights the big slowdown late last year, when Covid cases jumped. Today, job creation is averaging just over 500,000 per month. It’s impressive, but is it enough?

Given incredibly strong economic growth right now, job creation probably should have been higher in April and May. Being that it wasn’t is probably due to the lack of sidelined workers willing to take jobs. We see it in the record number of job openings per U.S. BLS data.

Probable reasons—

  • Enhanced unemployment benefits
  • Inability to find child care
  • Fear of Covid
  • Early retirements
  • In resort communities, a lack of foreign students that would normally be available

From the Fed’s viewpoint—employment is rising, but the Fed believes that plenty of progress is still needed to get back to the Fed’s definition of full employment. Therefore, few expect a near-term change in the Fed’s easy money policy.