Most people are familiar with the expression “April showers bring May flowers”, which indicates that even during dark, gloomy times, brighter days lie ahead. This phrase is a lesson of patience and hope for those who are experiencing adversity. Surprisingly, it is also applicable to the economic hardship that many unemployed people in the U.S. have faced.In fact, by the end of May, 339,000 of these “flowers” grew to present themselves as job opportunities to those that have been struggling with unemployment.
Job availability in the U.S. had experienced a noticeable decline in the early months of 2023, but after significant growth in April, the labor market is not ready to slow down just yet. According to the Bureau of Labor Statistics, 339,000 jobs were added in May as compared to the 294,000 that were created in April. Economists were anticipating a modest gain of only 190,000 jobs, but clearly their projections underestimated the growth of labor. The jobs report and general economic data signal that the U.S. is not approaching a recession and is in fact expanding at a reasonable rate.
So where did all these jobs come from? Increase in available jobs came from a variety of industries and sectors: professional and business (64,000), government (56,000), health care (52,000), social services (48,000), construction (25,000), and transportation (24,000). COVID-19 had caused large declines in these fields, but many people are returning gradually to these professions in greater numbers than before.
Despite all this, there was an increase in the unemployment rate from 3.4% to 3.7%, a growth that concerns several experts given that this was the biggest monthly increase since the days of the pandemic. BLS data indicates that this jump was primarily driven by lay-offs and temporary jobs reaching completion. On another note, it seems to be taking longer for people to find jobs, as the number of people facing unemployment for anywhere between 15-26 weeks grew. Similarly, initial weekly unemployment claims have not decreased. Even with greater job availability, employers are struggling to hire suitable applicants. Companies have been laying off younger and less experienced workers as well.
The good news, though, is that the labor force participation rate has stayed stable around 62% during May. Also, the data involved in calculating the unemployment rate is less accurate and can be volatile considering the source is survey results from a limited number of households. The sharp drop of 369,000 in self-employment best explains why the unemployment rate rose despite the number of available positions growing. Regardless, the increase in jobs is a tell-tale sign of the U.S. labor market’s solidity. The labor report has also positively impacted financial markets as the Dow Jones Industrial Average went up about 400 points and U.S. treasury yields have increased.
The number of job openings seen this month will play an important role in the near future when the Federal Reserve meets to decide whether to increase interest rates for the 11th consecutive time. Data has shown that consumers continue to spend and demand more from companies. However, economic reports can produce mixed conclusions and rarely indicate certainty as to how the FED should proceed. High interest rates have repeatedly weighed down on the housing market and loan borrowing, yet spiraling job growth may raise concern about continuing to protect against inflation. A strong job market is beneficial for workers, but it places increased stress on the price level, making it hard for the FED to maintain stability. Nevertheless, more jobs along with increased wages as compared to last May are a positive indicator for an improvement in the quality of life for American workers.
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