May 2021 Jobs Report: U.S. Adds 559,000 to Payrolls

Employers added hundreds of thousands of jobs last month as coronavirus infections ebbed, vaccinations spread and businesses reopened, the government reported Friday. But the labor market’s recovery from the pandemic is proving to be choppy.

Hopes that a strong and steady surge of hiring would follow the first wave of vaccinations have so far turned out to be overly optimistic. Job creation in May doubled from the previous month but still fell below most forecasts. And payroll gains, which have bounced up and down this year, may continue their uneven progress through the summer.

Several economists said they did not expect the pace of hiring to pick up steam at least until the fall, when more schools fully reopen, a majority of the population is vaccinated and pandemic-related jobless benefits end.

“It’s probably going to be a bumpy ride from here till September,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

This latest report from the Labor Department highlighted the puzzling fact that millions remain on the jobless rolls even as many employers complain of worker shortages.

President Biden acknowledged as much on Friday. “As we continue this recovery, we’re going to hit some bumps along the way,” he said. “We can’t reboot the world’s largest economy like flipping on a light switch.”

“This much is already clear,” he added. “We’re on the right track.”

Republicans seized on the report to argue just the opposite. The party’s members on the House Ways and Means Committee, in a news release, pointed to “Main Street businesses desperate to rehire their employees, and far too many Americans left on the sidelines.”

Payrolls grew by 559,000 workers in May, and the unemployment rate fell to 5.8 percent, the first time it has dropped below 6 percent since the pandemic started.

The average monthly gain over March, April and May was about 540,000 positions. If that rate continues, it will be well into 2022 before the labor market returns to prepandemic levels.

The report is unlikely to sway the Federal Reserve from its caution about increasing interest rates. “I would like to see a little bit more on the labor market to really see that we’re on track,” Loretta J. Mester, president of the Federal Reserve Bank of Cleveland, said Friday on CNBC.

At the moment, there are more than eight million job openings and 9.3 million people unemployed. Still, the demand for workers is outpacing the supply of those ready to snap up a position.

Nearly half of the small-business owners surveyed by the National Federation of Independent Business in May said they were struggling to fill openings.

“I think we were all expecting that as things reopened, there would be a release of energy that would be very powerful,” said Carl R. Tannenbaum, the chief economist for Northern Trust. “But I also think we underestimated just how strong that would be. Industry after industry is finding themselves not completely prepared for what people want to do.”

Many employers have blamed temporarily enhanced federal unemployment benefits for the shortage of workers, prompting 25 Republican-led states to plan to withdraw from some or all of the programs ahead of their Sept. 6 expiration date.

Most economists have pushed back against blaming the expanded benefits and have said the reality is more complicated. A child care shortage, continuing health concerns, low wages and competing priorities all probably play a larger role, they say. Employment in child care, for example, is only 70 percent of its prepandemic level.

“Is there a labor shortage?” Ms. Farooqi of High Frequency Economics asked. “In my mind, absolutely not. There is a ramping-up effect, and that is going to persist for a little bit. You have to expect some frictions.”

At the beginning of the pandemic, job postings plummeted much faster than job searches, said Julia Pollak, a labor economist at the online jobs site ZipRecruiter. Now, there is an inverse dynamic: Postings have picked up much more quickly than search activity.

She also said there was a mismatch between the positions being offered and those being searched for. More than half of job seekers want remote work, while only 10 percent of employers are offering that option.

And surveys by ZipRecruiter found that 44 percent of respondents wanted to work remotely even after the pandemic ended, Ms. Pollak said.

Coronavirus-related assistance from the government may have given some people a little more wiggle room to choose a job that they consider to be a good fit. A third of job seekers said they felt financially pressured to take the first job offered, compared with a half who felt that same crunch before the pandemic, according to ZipRecruiter.

There may be other reasons that the labor force participation rate, which edged down slightly in May to 61.6 percent, has not recovered. The pace of early retirements accelerated during the pandemic, shearing roughly 1.5 million workers from the labor force. And more than a million people said they did not work last month because of illness.

People who have more of a financial cushion may also be taking some time as the pandemic recedes to revel in the reopening and visit relatives and friends for the first time in more than a year.

“Leisure time is worth more this summer than it was last summer, because people actually can travel,” said Jed Kolko, the chief economist at the job search site Indeed. “Also, people are optimistic about the economy,” he said, so they may be willing to risk waiting a bit before starting a job.

In May, the biggest job gains were in leisure and hospitality as people celebrated the shrinking Covid-19 risk by returning in droves to bars and restaurants. The education, health care and social assistance sectors also showed growth. Construction jobs declined, a trend that some economists linked to glitches in the supply chain.

Competition for workers can be fierce. “This has been the best five months of my career,” said Tom Gimbel, who has worked in recruiting for 25 years. “Business is up 40 percent from two years ago,” said Mr. Gimbel, who is the chief executive of LaSalle Network, a Chicago staffing firm that handles entry-level to executive searches.

Average earnings for all workers rose 15 cents an hour in May after a 21-cent gain in April. The increase continues a pattern of strong wage growth, particularly for those at the low end of the scale. The smaller increase, though, may also indicate that employers are not feeling as pressured to offer more money to attract workers.

Mark Herrington, the chief executive of OnSolve LLC, a risk intelligence company based in Alpharetta, Ga., plans to have hired 90 additional employees, mostly in sales and engineering, by the end of this year. “We’ve had trouble finding people,” he said, adding that people seemed more reluctant to switch jobs during the pandemic.

Some job hunters are finally breathing a sigh of relief.

Todd Heft lost his job in digital marketing last spring. For six months, he collected a paycheck doing contract work, but he has been unemployed since October. He began looking for a new job in earnest in January but was struck by how few opportunities there were as the pandemic continued to rage.

Then, in April, he said, “a barrage of recruiters started reaching out to me.” Though he has yet to land a new job, he is “extremely optimistic” that he will have work within the next month as the economy continues to improve.

“I’m supremely confident at this point,” said Mr. Heft, who lives in Bethlehem, Pa.

Other job searchers say they have had trouble getting hired at a level comparable to their previous positions.

Jenny Crowley, 40, worked in marketing for a professional education and entertainment company in Chicago before her industry “screeched to a halt” during the pandemic. She has been urgently looking for a job since July, estimating that she has applied for more than 400. But she said she had had only had a handful of interviews and no job offers.

Some of her friends are in similar situations — an unfortunate reality that nevertheless provides a kind of unusual solace. “It’s not unique to me at all, which is both comforting and frustrating at the same time,” said Ms. Crowley.

“I think there’s just a lot of competition in the job market right now,” she said, “and I think a lot of it is right time, right place.”

About 741,000 fewer Black women were employed in May than in February 2020, a 7 percent decline. Roughly 890,000 fewer Hispanic women were employed, down 7.2 percent. Although Americans across racial and gender groups are gaining jobs — and women actually made greater gains than men in May — those persistent shortfalls underline that a long road remains before the labor market returns to its former strength.

By contrast, teenagers are flooding back into the labor market, working at a rate not seen in more than a decade.

Sydney Ember, Ben Casselman and Jeanna Smialek contributed reporting.