Updated
June 4, 2021, 1:30 p.m. ET
Hiring accelerated in May, with the government reporting on Friday that employers added 559,000 workers, about twice the previous month’s gains.
The unemployment rate fell to 5.8 percent, the Labor Department reported.
As infections ebb, vaccinations spread and businesses reopen, the economy has started to regain its footing, but the path has not been smooth. Job growth bounced up and down in recent months, and may continue its uneven progress throughout the summer, analysts said.
“It’s probably going to be a bumpy ride from here till September,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
The labor force participation rate edged down slightly to 61.6 percent, evidence that many workers who dropped out of the work force during the pandemic have still not returned. That has been vexing to employers who have complained about a lack of response to help-wanted ads.
“We’re making good progress to getting back to full employment,” said Carl R. Tannenbaum, chief economist for Northern Trust, “but it will be a number of months before we reach that goal.”
The biggest job gains were in leisure and hospitality as people returned in droves to bars and restaurants. The education, health care and social assistance sectors also showed growth. Construction jobs shrank, a trend that some economists link to glitches in the supply chain.
Job postings on the online jobs site Indeed were up 27 percent at the end of May from their level in February 2020, before the pandemic hit.
Nearly half of small-business owners surveyed by the National Federation of Independent Business in May said they were struggling to fill slots. Many employers have blamed enhanced pandemic-related unemployment benefits for the shortage of workers, which has prompted 25 Republican-led states to withdraw from some or all of the federal jobless assistance programs in the coming weeks, months ahead of their expiration.
Most economists have pushed back against this argument and say the reality is more complicated. A lack of child care, continuing health concerns, low wages and competing priorities all probably play a larger role, they say.
“Is there a labor shortage?” Ms. Farooqi 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 a similar dynamic: Postings have picked up much more quickly than search activity.
“It’s just a matter of time,” said Ms. Pollak, who pointed out that many prime-age workers were only recently able to get their first Covid-19 vaccination.
She also said there was a mismatch between the type of jobs being offered and those being searched for. More than half of seekers want remote work, while only 10 percent of employers are offering that option.
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 pre-pandemic levels.
The number of people who have been unemployed over a long haul — more than 26 weeks — dropped to 3.8 million, roughly 40 percent of the total.
Finance ministers from the Group of 7 nations started two days of high-stakes meetings in London on Friday, seeking to keep the global economic recovery on course and to make progress in a long-sought overhaul of the international tax system.
The summit is the first in-person gathering of top officials from the world’s advanced economies since the pandemic emerged in early 2020 and turned such events into virtual affairs. As they huddle at London’s Lancaster House, officials are expected to discuss how much additional fiscal support their countries require, how to help developing countries gain access to vaccine supplies and ways to collaborate more effectively to combat climate change.
For Treasury Secretary Janet L. Yellen, who is making her first international trip as President Biden’s top economic diplomat, a key priority will be gathering support behind a broad agreement that aims to put an end to global tax havens in hopes of finalizing a deal by July.
The talks began with additional urgency as Mr. Biden continues to try to raise taxes on American corporations, including those that are profitable but report no federal income tax liability. Business groups and Republicans have complained that raising taxes in the United States will put American companies at a global disadvantage and provide an incentive for firms to move overseas.
The Biden administration is pushing for a global minimum tax to try to prevent that from happening. The United States has expressed support for a global tax of at least 15 percent and offered a separate proposal that would put an additional levy on the world’s largest 100 companies that would be paid to countries based on where goods or services are sold. The Biden administration hopes that such a pact would curb offshoring and stop the spread of digital services taxes in Europe that it believes are unfairly targeting American technology companies.
The G7 countries include Britain, Canada, France, Germany, Italy, Japan and the United States.
The meetings with be the first test of Ms. Yellen’s deal making ability as Treasury secretary. She met on Thursday evening with Rishi Sunak, Britain’s chancellor of the Exchequer, who has yet to publicly back the U.S. proposals. Ms. Yellen said on Twitter that it was a “great conversation” about shared priorities.
Ms. Yellen is scheduled to meet with the rest of her G7 counterparts along with Paschal Donohue, the Irish finance minister who is attending in his capacity as Eurogroup president. Ireland, which has a tax rate of just 12.5 percent and is not part of the G7, has expressed its opposition to the global minimum tax proposals.
A Treasury official said this week that the meetings could conclude without resolution over critical details such as a minimum tax rate. The United States hopes that the talks will yield momentum going into the Group of 20 meeting that will be held next month in Italy, the official said.
The top economic officials from Spain, Italy, France and Germany expressed optimism on Friday morning that the tax negotiations, which have been going on for several years, are on track. In an essay published in The Guardian newspaper, they suggested that the new negotiating approach from the Biden administration was more constructive than the tactics of the Trump administration, which walked away from the bargaining table last year.
“With the new Biden administration, there is no longer the threat of a veto hanging over this new system,” they wrote, adding that they thought a global tax agreement could be done by July. “It is within our reach.”
The Labor Department’s report that the economy added 559,000 jobs in May, an acceleration from April, buoyed Democrats and the Biden administration on Friday, adding new fuel to the president’s claims that vaccinations and his economic program are beginning to get the economy back on track after a halting recovery from pandemic recession.
“This is historic progress,” Mr. Biden said in remarks from Rehoboth Beach, Del. “Progress that’s pulling our economy out of the worst crisis it’s been in in 100 years.”
He went on to claim credit for that progress, both from his administration’s campaign to ramp up America’s vaccine production and distribution and from the $1.9 trillion economic aid legislation he signed into law in March.
“None of this success is an accident, it isn’t,” Mr. Biden said, hailing “the cooperation, the American people in responding to my effort to get covered under control, wearing masks conditioning and getting vaccinated. And it’s no small part of the bold action we took by passing the American rescue plan.”
But the report, which fell short of analyst expectations for the second straight month and showed a slight shrinkage in the labor force, also provided fodder for Republican critics of the president. They say enhanced unemployment benefits — which were extended by Mr. Biden’s aid legislation in March — are discouraging workers from returning to jobs and holding back what could be an even faster recovery.
“Long-term unemployment is higher than when the pandemic started, and labor force participation mirrors the stagnant 1970s,” Representative Kevin Brady, the top Republican on the Ways and Means Committee, said in a news release. “It’s time for President Biden to abandon his attack on American jobs, his tax increases, his anti-growth regulations and his obsession with more emergency spending and endless government checks.”
After the April report fell substantially short of expectations, Republican governors across the country moved to prematurely end the $300-per-week supplemental unemployment benefits that began under President Donald J. Trump and are scheduled to continue through September under Mr. Biden’s aid package.
Mr. Biden said Friday those benefits had helped Americans weather the crisis but noted they expire in 90 days. “That makes sense,” he said, “it expires in 90 days.”
White House economists said last month there was not yet evidence in the numbers that the supplement was discouraging work, pointing instead to constraints like school closures and child care issues keeping women with children from returning to work, along with a large number of working-age Americans who had not been fully vaccinated. Administration economists doubled down on that reading on Friday.
“It is too soon to conclude that labor supply issues are holding back the long-term path of the recovery,” the chair of the White House Council of Economic Advisers, Cecilia Rouse, wrote in a blog post on Friday morning.
Democratic leaders in Congress continued to push for the unemployment benefits to continue as scheduled, and for lawmakers to move to enact the rest of Mr. Biden’s $4 trillion economic agenda.
“The American people need all the support they can get, especially Black and Hispanic communities that were among the hardest hit by the pandemic,” Representative Don Beyer of Virginia, the chairman of the Joint Economic Committee, said in a news release. “Lawmakers must step up. That includes continuing enhanced UI to support workers seeking jobs and Congress passing President Biden’s Jobs and Families Plans.”
Hourly pay rose in May, but more slowly than in April — a possible sign that labor supply constraints are easing.
Average earnings for all workers rose 15 cents an hour in May, down from a 21-cent gain in April, the Labor Department said Friday. There was a similar slowdown in gains for nonsupervisory workers.
Economists are watching pay particularly closely because it is a key indicator of how much trouble employers are having attracting and retaining workers. Many companies, particularly in the service sector, have been complaining that they are struggling with hiring as they try to return to business as usual. Pay data from April lent credence to those complaints, showing significant increases in average pay, particularly in the leisure and hospitality sector.
Pay for non-supervisors in leisure and hospitality jumped again in May, but by less than half as much as in April. Still, those workers have seen significant pay gains in recent months: Their average earnings were $15.90 an hour in May, up from $14.80 in April. That continues a pattern of surprisingly strong wage growth, particularly for low-wage workers, during the pandemic.
Another sign that employers are having an easier time finding workers: Leisure and hospitality workers worked fewer hours last month. That followed a big jump in working hours in April.
As Americans regain jobs in a healing economy, some groups are making faster progress than others — and Hispanic and Black women lag the most.
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.
Women have faced special challenges during the unusual recession wrought by the coronavirus pandemic. As state and local lockdowns closed schools, women were left shouldering new child care burdens to a greater extent than men. Women, and especially those in minority groups, are also more likely to work in many face-to-face service jobs that disappeared amid lockdowns.
Economic officials say child care issues and health concerns could be influencing how quickly adults return to work. Unemployment insurance, government checks and savings amassed during months stuck at home may allow some workers to be picky as they search for new jobs.
As those trends play out, progress is also diverging sharply by age. Teenagers are flooding back into the labor market, working at a rate not seen in more than a decade. Workers older than 55, on the other hand, remain much less likely to work than before the pandemic and have made little progress in recent months.
The progress of Americans in their prime working years — which economists define as 25 to 54 years old — falls somewhere in between. A climbing share work as jobs return, but employment rates remain well below their February 2020 level.
Loretta Mester, president of the Federal Reserve Bank of Cleveland, says she is watching for more of a recovery in the prime-age labor force participation rate, which tracks adults who are working or looking for jobs.
“We still have further progress to make,” she said in an interview on CNBC after the jobs report was released.
The Federal Reserve was hoping for months of strong job gains that would swiftly return the economy to maximum employment — but the decent-but-not-great May employment gain underlined that although the labor market is healing, progress is bumpy.
Employers added 559,000 jobs last month, below the 675,000 new jobs that economists surveyed by Bloomberg had expected. That gain would be strong in normal times, but it came after a sharp hiring slowdown in April, and with the economy still 7.6 million jobs
short of its prepandemic level.
The Fed is closely watching employment data as it assesses when to dial back its mass bond purchases, which help to make many borrowing cheap and stoke the economy.
Central bank officials have said they need to see “substantial” further progress toward their two goals — maximum employment and stable inflation — before scaling down that bond buying. They have an even higher hurdle for lifting interest rates: They want to see a return to full employment and inflation that is expected to stay above 2 percent for some time before raising rates from rock bottom.
Inflation has been moving higher this year, but Fed officials have said they expect much of the pop in prices to be temporary. And when it comes to jobs, many have been clear that the economy remains well shy of their target.
“I expect to see further progress on employment in coming months,” Lael Brainard, a Fed governor, said earlier this week. “That said, today employment remains far from our goal.”
Randal K. Quarles, the Fed’s vice chair for supervision, said in a recent speech that he expected price gains to meet the Fed’s criteria for slowing bond buying later this year. But he said the labor market offered reasons for patience.
Officials had been hoping for a quicker rebound than the one that has materialized. Jerome H. Powell, the Fed chair, said at an April event that “we want to see a string of months like that,” referencing a recent jobs report that had showed a near-million jobs.
As central bankers focus on jobs, investors are also trained on the data, because they are trying to figure out when the Fed will begin to cut back on buying of government-backed bonds. The Fed has been buying about $120 billion worth of debt each month in a program called quantitative easing. Those purchases tend to push asset prices higher, and the announcement of a policy shift has the potential to be disruptive: Markets jerked wildly when the Fed in 2013 hinted that it would slow a post-financial crisis quantitative easing program.
The S&P 500 was up 0.7 percent on Friday after the Labor Department’s monthly jobs report showed an increase in hiring in May compared with a surprisingly low number the month before.
U.S. employers added 559,000 jobs in May, the government said and the unemployment rate fell to 5.8 percent. Investors and policymakers are trying to deduce what is happening in the labor market, in which millions of people are unemployed but some employers say they are struggling to hire.
The slower than expected increase in jobs is likely to give the Federal Reserve more time before policymakers consider pulling back monetary stimulus. The jobs report “is allowing investors to relax a little about the prospect of Fed tightening,” Mike Bell, a strategist at JPMorgan Asset Management, wrote in a note.
The yield on 10-year Treasury notes fell 7 basis points, or 0.07 percentage points, to 1.55 percent, as investors bet that interest rates would stay lower for longer.
An index of the U.S. dollar, which tracks the currency against major peers, fell 0.4 percent.
Oil prices rose. Futures on West Texas Intermediate, the U.S. crude benchmark, climbed 0.9 percent to $69.42, the highest since late 2018.
Travel and tourism stocks fell in Europe after Britain removed Portugal from the list of countries people could travel to without quarantining on their return. Britain also didn’t add any new countries to the list, citing rising coronavirus cases.
Earlier on Friday, shares in Rolls-Royce, which makes and services engines for airliners, fell 1.9 percent. IAG, which owns British Airways, dropped 0.9 percent after falling 5.4 percent on Thursday when the changes to the travel list were announced. EasyJet and Wizz Air shares declined about 6 percent this week.
The Stoxx Europe 600 gained 0.4 percent.
The fact that the labor force participation rate was essentially flat is going to create more pressure on President Biden and Democrats to transition the unemployment insurance supplement into a hiring bonus.
The desire for remote work seems to be one reason why face-to-face jobs in restaurants and bars are going unfilled. A ZipRecruiter survey found 44 percent of people want remote work even after the pandemic ends.
There is a mismatch between the type of jobs employers are offering and the type that workers want. More than half of people searching on ZipRecruiter want remote work. Just 10 percent of employers are offering that.
The boom in teenage employment is real. The jobless rate among 16- to 19-year-olds dropped from 14.8 percent in January to 9.6 percent in May.
Most economists don’t expect job creation to really go into overdrive until the fall when schools reopen, enhanced unemployment benefits end and more people are fully vaccinated.
The 10-year Treasury yield is now down a little, to 1.6 percent.
To some degree, friction is normal in reopening an economy as mammoth at the United States. It’s not like switching on a light.
The official unemployment rate fell to 5.8 percent in May. Adjusting for misclassification and people leaving the labor force (roughly what the Fed has recently been discussing lately), unemployment was 8.7 percent, down just a tick from April.
There is a big puzzle in the labor market: Nearly seven million people who are out of work say they want a job and there are roughly eight million jobs open. Why such a mismatch?
Mike Bell at JPMorgan Asset Management says the jobs report is a “goldilocks scenario of a labor market recovery that is not too cold to raise concerns about the economy, but not too hot to prompt fears about faster than expected monetary policy tightening.” That’s good for stocks.
Hourly pay in leisure and hospitality is now running above its pre-Covid trend. I wouldn’t make too much of one month of data, but if that continues, it would be notable.
This slowdown in employment gains will make it easier for the Fed to keep up its stimulus and other central banks, too. I’m thinking about the European Central Bank, which meets Thursday. A debate about tapering is happening there, too.
The number of workers reporting that they are on temporary layoff fell below two million for the first time since the pandemic began. Permanent layoffs are also falling, but more slowly.
The 559,000 jobs added is unlikely to alter the Fed’s patient stance given they were looking for much more robust job growth before starting to taper or nudging rates higher. This report doesn’t move the needle much.
There is not a big reaction in the markets to the May jobs report. Stock futures are up a little, the dollar is down 0.3 percent and 10-year Treasury note yields are completely flat at 1.625 percent.
Remote work is continuing to fall as more offices reopen; 16.6 percent of workers were remote in May, down from peak of 35.4 percent. And 30 percent of professional workers were remote, down from a high of 57.4 percent.
Perhaps unsurprisingly, a large portion of the May pickup in jobs was in leisure and hospitality, which was up 292,000 for the month. As restrictions lifted further and Americans — vaccinated and eager to go out again — returned to restaurants and bars.
The three-month average job creation is 541,000. That would be great in a normal recovery, but it is far from the kind of explosive surge many (me included!) have been expecting. At this rate, we’re 14 months away from filling the hole.
Job growth picked up in May, but was still weaker than in March. The big picture: we’re still down 7.6 million jobs from before the pandemic.
The Fed was hoping for a “string” of million-ish jobs numbers. They are having to settle for something a lot more lackluster.
Put it all together, and this is an economy that is healing, but not with the kind of robust, hot vaccine summer boom that I had expected before the April jobs report.
The labor force participation rate actually edged down. That is consistent with the story that people are holding back, not re-entering the workforce en masse despite the economy re-opening.
Headline job gains were super close to consensus, labor force participation was little changed, and the number of people who are working part time for economic reasons was stable. Whatever you thought about the job market yesterday is unlikely to change too much on this report.
The unemployment rate fell for “good” reasons in that employment was up, unemployment was down. But labor force was basically flat (actually down slightly), which will add fuel to “labor shortage” concerns.
The revision to April jobs growth is only up 278,000. Nothing special — I suspected we might see a much bigger upward revision.
U.S. employers added 559,000 jobs in May. The unemployment rate fell to 5.8%.
William Ackman’s jumbo special purpose acquisition company has finally found its big deal: It is closing in on an agreement to buy a 10 percent stake in Universal Music Group, the home of artists like Taylor Swift, at a $42 billion valuation.
If completed, the transaction would be the biggest involving such a fund, known as a SPAC, to date — and it would certainly be among the most complex, the DealBook newsletter notes.
Mr. Ackman’s SPAC, Pershing Square Tontine Holdings, would invest $4 billion for a 10 percent stake in Universal, of which the French conglomerate Vivendi owns 80 percent and China’s Tencent owns 20 percent. A deal could be struck before the end of the month.
There would still be $1.5 billion left in what remains of the SPAC, and that would be rolled into a new publicly traded vehicle into which Mr. Ackman’s Pershing Square hedge fund would put more money, for a total of $2.9 billion. That vehicle would then look for another acquisition target.
Existing Pershing Square Tontine investors would also receive a financial instrument known as a right that offers them a piece of yet another new takeover vehicle known as a special purpose acquisition rights company, or SPARC.
Vivendi had already been planning to take Universal public in Amsterdam; those plans will go ahead, meaning that unlike a traditional SPAC deal, Pershing Square Tontine won’t give Universal its stock listing. SPAC investors, who would not get a vote on the deal, would instead get Universal’s shares when it later goes public.
The complex transaction is unlike any other SPAC deal, and in many ways doesn’t resemble a SPAC at all. Vivendi is a clear winner, because it would get another major investor for Universal at a higher valuation than Tencent had given the music label earlier this year.
The outcome for Pershing Square Tontine’s various investors is more complicated. Mr. Ackman’s hedge fund would end up owning at least 29 percent of the fund created from the remainder of the SPAC, giving it a greater percentage of the vehicle than it had before the Universal deal.
Those investors could also take a stake in the SPARC, giving them the option of participating in whatever deal the new fund strikes at a set price. The SPARC would have up to $10.6 billion to spend on a takeover, assuming all the rights are exercised and Mr. Ackman’s fund invests the full $5 billion it is allowed to in the new vehicle.
Neither the leftover Pershing Square Tontine fund nor the SPARC is subject to the two-year deadline that SPACs generally face.
Shares in Pershing Square Tontine plunged in after-hours trading on Thursday after news reports about the Universal transaction emerged, and opened about 10 percent down on Friday. They remain a bit above the blank-check firm’s $20 I.P.O. price, but down from a high of more than $30 a few months ago.
Today in the On Tech newsletter, Shira Ovide writes that technology has evolved from a succession of Big Bang moments to something so meshed into our lives that we often don’t notice it.
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