Month-by-month economic data always have to be treated with care, but today’s jobs report ought to ease some of the labor-market worries that we saw after the disappointing April release.
The Financial Times reports on the details:
The US economy created 559,000 jobs in May as the unemployment rate fell to 5.8 per cent, suggesting the labour market has regained some strength amid fears that worker shortages were holding the recovery back.
The non-farm payrolls data released by the US labour department on Friday was slightly worse than economists’ expectations of about 650,000 employment gains, but marked an improvement over the 278,000 jobs posted in April.
The figures were released at a pivotal moment for the US economy, with growth rebounding strongly thanks to the lifting of pandemic restrictions across the country and hefty fiscal stimulus, while triggering a burst of inflation.
Meanwhile, businesses have been complaining that they are struggling to rehire workers to cope with surging demand, prompting them to raise wages in a bid to attract new employees.
The dip in the jobless rate, from 6.1 per cent in April, brought it below 6 per cent for the first time since the start of the pandemic, but labour force participation declined, suggesting there was still some hesitance among Americans to rush back into the workforce.
At the time of this writing, U.S. equity markets were up, and the Wall Street Journal’s explanation for that makes a lot of sense to me, at least in the very short term:
Labor Department data showed the U.S. economy added slightly fewer jobs than economists had expected, while the unemployment rate fell more than expected. Together, the mixed data offered investors one main takeaway: the labor market is improving, but not at a pace that will make the Federal Reserve rush to pare back additional support from the economy.
The longer-term implications of the Fed’s refusal to change course is a topic for another day.
“Nothing from today is going to move the needle for the Fed imminently,” said James McCann, deputy chief economist at Aberdeen Standard Investments, in emailed comments.
Barring a sustained pickup in wage pressures, “the Fed remains convinced that short term price pressures will not last, suggesting that rates will be on hold until 2023 absent any nasty surprises,” Mr. McCann said.
If I had to guess, nastiness lies ahead. Whether that will be a “surprise” is a matter of debate.