The US labor market keeps barreling along. Despite concerns about a slowing economy, employers continue to add jobs at a torrid pace. Over the past three months, payrolls have grown by an average of over 400,000 jobs a month despite the unemployment rate being 3.6%. Demand for workers is tremendously strong and it’s pulling more and more people back into work. The labor market will eventually slow down, but for now it’s still humming.
Once again, leisure and hospitality lead the way in employment growth, adding 84,000 jobs with more than half of those gains coming from bars and restaurants. While there may be some signs of consumption shifting toward services, jobs growth remains strong in goods and goods-related industries. Transportation and warehousing continues to add jobs even though the number of jobs in that sector is more than 12% above its February 2020 level. Retail was a noticeable weak spot in the report, shedding about 61,000 jobs. That loss was concentrated in the industry group containing big box retailers who have recently reported struggles.
After last month’s dips, the labor force participation rate and the employment-to-population ratio rose in May. This reversal is a positive indication that strong demand continues to pull workers back into employment. Unemployed workers also continue to find work as the job-finding rate for these workers rose in May and remains higher than its pre-pandemic average. Higher wages are part of the appeal, but wage growth has cooled in recent months. While more workers are getting jobs, the data show no sign of a pick up in layoffs. The rate at which workers are leaving employment continues to be quite low.
The labor market doesn’t seem to be losing much steam. Employers are adding jobs at a very brisk rate despite the low levels of unemployment. If demand continues to be strong, then more and more workers should be pulled into the labor market. When the labor market does start to slow down, hopefully it will do so after many more workers have already found jobs.