U.S. job growth picked up in May and the unemployment rate fell, signaling firms are making some progress filling a record number of openings as the economy powers up.
Payrolls increased by 559,000 last month after a revised 278,000 gain in April, according to a Labor Department report Friday. The median estimate in a Bloomberg survey of economists was for a 675,000 rise. The jobless rate dropped to 5.8%, while the labor participation rate was little changed.
Long-term Treasury yields are little changed, the dollar declined and U.S. stock futures moved higher.
Employers are pressing to get headcounts in line with a resurgence in demand. May was an inflection point in the reopening of the economy because of increased coronavirus vaccination rates, more social activity and fewer business restrictions across most of the U.S.
The payrolls gain leaves the U.S. labor market 7.6 million jobs short of pre-pandemic levels. A broader improvement in the labor market requires faster job growth among service providers, like the leisure and hospitality industry, that have suffered a more lengthy disruption from the health crisis.
The data are likely to calm any concerns at the White House that the labor market’s recovery had stalled and that policies such as extra unemployment benefits were keeping significant numbers of workers at home. At the same time, the uneven progress across industries suggest that challenges remain.
The recovery in employment may remain bumpy as childcare obligations, enhanced jobless benefits, skills mismatches and supply shortages impede hiring efforts.
The shortfall in the level of payrolls, along with views that recent inflationary pressures will prove temporary, help explain why Federal Reserve officials will hold the line on their ultra-easy monetary policy.
“Remaining steady in our outcomes-based approach during the transitory reopening surge will help ensure the economic momentum that will be needed as current tailwinds shift to headwinds is not curtailed by a premature tightening of financial conditions,” Fed Governor Lael Brainard said Tuesday.
Restaurants reported the largest payrolls increase last month, with a gain of 186,000 jobs, the Labor Department’s report showed. Health care and education also reported notable increases, while employment in construction decreased for a second month.
The labor force participation rate, a measure of those working or looking for work and closely watched by the Fed, was 61.6% in May after 61.7%. The employment-population ratio ticked up to 58%.
More than 20 states have announced plans to phase out federal unemployment benefits before they expire in September, which could lure workers back into the labor force in the coming months.
Adding workers is “one of the most important issues because it is very difficult, particularly here in the U.S., to get labor,” Christopher Nassetta, CEO at Hilton Worldwide Holdings Inc., said on the company’s May 5 earnings call. “You just can’t get enough people to service the properties.”
Average hourly earnings rose 0.5% in May from a month earlier, to $30.33, the jobs report showed.
“The data for the last 2 months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” the Labor Department said in a statement.