Total nonfarm payroll employment increased by 390,000 in May, a slight decline from the 428,000 jobs added during April, according to the latest jobs report from the U.S. Bureau of Labor Statistics. The unemployment rate remained unchanged at 3.6%.
“Both jobs and wages continued to grow at a solid pace in May but indicated a sustained trend of moderation,” says Nikolas Scoolis, manager, housing economics for Zonda. “While 390,000 is a historically strong figure, May’s nonfarm payroll growth was at the lowest level since April 2021. As the economy continues toward full employment, it is likely that we will see this trend of moderation maintained in the near future.”
The number of unemployed individuals was relatively unchanged from April at 6 million. Both the unemployment rate and the number of unemployed individuals remain similar to their pre-pandemic, February 2020 levels (3.5% and 5.7 million, respectively).
“As in prior reports, job gains were widespread across sectors, with leisure and hospitality (+84,000), professional and business services (+75,000), and education and health services (+74,000) leading the way,” says Fannie Mae chief economist Doug Duncan. “On the other hand, the retail trade sector posted a large decline of 61,000 jobs in May, possibly a reflection of firms attempting to recalibrate staffing levels following a jump in hiring at the beginning of the year to compensate for the omicron surge.”
The labor force participation rate and the employment-population ratio were both little changed from the previous month, at 62.3% and 60.1%, respectively. Both measure at 1.1 percentage points below their February 2020 values.
“Average hourly earnings grew at a 5.2% year-over-year pace in May, down slightly from the prior month’s pace,” Duncan says. “While this figure is a clear signal that firms are still looking to hire workers, such high wage growth may exacerbate inflationary pressures in the economy.”
Among the unemployed, the number of permanent job losers remained at 1.4 million in May and the number of persons on temporary layoff declined slightly to 810,000, according to the Bureau of Labor Statistics.
The number of long-term unemployed individuals—those jobless for 27 weeks or more—decreased slightly to 1.4 million, but the measure is still 235,000 higher than in February 2020. The long-term unemployed accounted for 23.2% of all unemployed individuals in May.
The number of persons not in the labor force who currently want a job declined from 5.9 million in April to 5.7 million in May. The measure remains above the February 2020 level of 5 million. The number of discouraged workers, a subset of marginally attached workers who believe that no jobs are available for them, totaled 415,000 in May, down from 456,000 in April.
According to the Household Survey Supplemental Data, the share of employed persons who teleworked in May due to the pandemic was 7.4%, down from 7.7% in April. During May, 1.8 million individuals reported that they had been unable to work because their employer closed or lost business due to the pandemic, relatively unchanged from April. Among those not in the labor force in May, 455,000 were prevented from looking for work due to the pandemic, down from 586,000 in the prior month.
Duncan says the residential construction sector, including specialty trade contractors, added 16,700 jobs in May, the second-highest pace since March 2021.
“In our view, this report should cement the Federal Reserve’s commitment to aggressive policy tightening over the coming months,” Duncan says.
