Economic Recovery Slows in May 2021

This month’s Employment Situation release from the Bureau of Labor Statistics shows jobs gains that have fallen short of expectations and an unemployment rate that is  largely a story of ‘two steps forward, one step back’ over the last several months.

There were 266k jobs added through April, which was significantly lower than the 900k range that many economists were forecasting. Despite being somewhat underwhelming, these figures mark the fourth straight month of jobs gains, and yet the unemployment rate still ticked back up a tenth of a percentage point (from 6% last month to 6.1% this month after being at 6.2% two months ago).

Notably, both the leisure and hospitality industry as well as the local government education sector saw significant jobs gains as a likely reflection of school/bar/restaurant reopening. In fact, half of the leisure and hospitality jobs gains went straight to food service and drinking establishments. Real estate rental and leasing also had significant gains (17k jobs) perhaps as an indication of the beginnings of a post-pandemic migration and geographic reshuffling. Interestingly, the industries with the most job losses were temporary help services as well as couriers and messengers, both of which seem intuitively related to an increasingly vaccinated society and an increasingly re-open economy.

Perhaps one of the figures most indicative of the continued reopening is that the number of people who did some kind of remote or tele-working last month was down to 18.3%, which is more than 2.5% less than the month prior. Also, there were 2 million fewer people claiming they were unable to work at least in part last month because their employer had closed or lost business due to pandemic-related reasons.

While there were over 580k fewer workers who were forced into a part-time schedule as a result of the pandemic last month, however, there were also nearly 240k would-be workers who were added to the ranks of the recently unemployed. As a result, there are now twice as many people who have been unemployed 5 weeks or less (2.4 million) as there are people who’ve been unemployed between 15 and 26 weeks (1.2 million). For the most part, however, the subsets of unemployed people were largely stable from month to month as was the labor force participation rate at 61.7%.

It’s also worth noting that average hourly payroll rates rose by about 20 cents over the past month seemingly in response to increased demand for labor as commercial activities - especially the in-person kind - continue picking up speed.

While this month’s report certainly leaves a lot to be desired, despite the minor uptick in unemployment, most of the metrics continue showing the economy moving in the right direction, albeit more slowly than would be ideal. While undershooting forecasts by a fair margin is never the optimum outcome, it is a good reminder of the significant uncertainty we still face in emerging from a relatively unprecedented economic and societal event. Many question marks still lie ahead, but adding hundreds of thousands of new jobs certainly qualifies as progress, and there is still good reason for optimism in the months ahead.