Insights and Perspectives

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for May 2021 on Friday, June 4^th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 15 months since the Covid-19 economic lockdown and signal reluctance among many of the jobless to return to the labor force. While strong job growth in March indicated the job market was about to take off, the last two months have had disappointing outcomes.

Employment in the U.S. rose by 559,000 jobs, only a fraction of the 2.7 million jobs expected in the Geographic Solutions, Inc. forecast. The WSJ Economist Survey forecast at 671 thousand jobs was closer.  The overestimation of jobs was partially due to a surge in job applications on Geographic Solutions websites that indicated greater enthusiasm to find employment. Job applications data had its highest monthly percent increase since May 2020 when the U.S. created 2.8 million jobs. The Geographic Solutions forecast was derived from internal data on the number of job openings, job severances, job searchers, and job applications.

The unemployment rate declined to 5.8%, above the Geographic Solutions forecast of 5.6% and below the WSJ forecast of 5.9%.  The unemployment rate forecast used internal data on job applications, job severances, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the USDOL.

Explosive job growth was expected in the service-providing sector but subdued increases in the goods-producing sector. Instead, the goods-producing jobs were flat (+3,000) and service-providing job growth was soft (+556,000). 

Job declines were most pronounced in Construction (-20,000), most likely the consequence of rising costs of supplies such as lumber. Job market gains came from a strong performance in the Leisure & Hospitality sector in May that totaled 292,000 new jobs, an encouraging sign for the most beleaguered sector since the onset of the pandemic.   

The Leisure & Hospitality sector in May was the only one with job increases in line with the explosive job growth expected as the vaccines are distributed. Leisure & Hospitality employment continues its climb, but it has a long way to go before completing its recovery. Its employment remains 15% below February 2020. No other major industry has employment more than 10% below its February 2020 total.

The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate decreased to 5.8% from the previous month.

The labor force participation rate declined slightly to 61.6% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.2% to 10.2%. Declining unemployment rates without robust job growth demonstrates that job-seekers are becoming discouraged and leaving the labor force.

The May labor market report was a disappointment and is likely to reignite debate on whether extended unemployment benefits are preventing some from re-entering the workforce.  When state employment numbers for May are released later this month, it will be interesting to see if there are noticeable differences among the states who are limiting unemployment benefits and those that are not. The labor market remains 8.2 million jobs below its February 2020 level.  The pace of hiring will need to pick up to avoid the recovery taking years to complete.