RALEIGH – The U.S. economy added 390,000 non-farm jobs in May 2022, and the country’s unemployment rate remained unchanged at 3.6%, according to the latest data from the Bureau of Labor Statistics on the country’s employment situation.
And those are great indicators for anyone looking for a job right now, said Dr. Anne York, a professor of economics and program director at Meredith College in Raleigh.
“All sectors of the economy were hiring,” said York. “Other than retail trade.”
And while many are concerned about a possibility of an economic recession looming on the horizon, “these labor market indicators do not show there are concerns about it yet when it comes to hiring,” said York.
Still, a recently released survey of business executives found that 16% of respondents reported they were understaffed, but had paused hiring efforts due to economic conditions and uncertainty in the current markets.
And there is at least one reason to be concerned about the state of the nation’s labor markets, said York. That’s because the labor force participation rate has not yet returned to pre-pandemic levels.
“If more people decide to enter the labor market, that will help with inflationary pressure from a “hot” labor market,” York said.
This segment of labor force has returned to normal
Even though there is a lower labor force participation rate now than there was prior to the pandemic, one sector of the labor market has returned to normal, said Greg Brown, the executive director of the Kenan Institute of Private Enterprise, in a briefing on Friday morning.
That’s the portion of U.S. workers aged between 25 and 54, said Brown.
When it comes to who is participating in the labor force, “we’re still a little bit shy” of the pre-pandemic figures, said Brown. “Not a sign of a weak labor market, really a sign that a lot of people have left the labor market and have chosen not to return.”
“Dipped during the pandemic, but has snapped back to the average of what it was in the last 20 years or so,” So while there has been a decline in labor force participation, in this sector of the job market, the economy is back to normal, Brown concluded.
Standard of living dropping
It’s not all good news, though. Because even though wages continue to rise, they’re rising at a much slower pace than inflation, said Dr. Michael Walden, an economist and a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.
“The result is workers’ standard of living is still dropping as inflation remains elevated,” said Walden.
Brown noted that real purchasing power for U.S. consumers has also declined in recent months, even with wage growth.
“Real purchasing power of consumers has declined because inflation has been higher than wage growth,” said Brown.
And there was a drop in the number of retail sales roles, by some 60,000 jobs, Walden noted, the only area of the economy where jobs were lost in the month.
“Retailers may be bracing for a pullback in sales as the Federal Reserve signals it will continue to raise interest rates in order to contain inflation,” said Walden.
While payroll jobs increased in May 2022, which analysts and economists expected, they increased at a slower pace than in April, Walden noted.
We may look back on May’s jobs report as the beginning of a trend of slowing job growth, said Walden. “Which is the goal of the Federal Reserve as it accelerates its fight against inflation.”
Walden is not anticipating job losses. But, he said, “if the Fed has to raise interest rates significantly higher to slow inflation, job losses and higher unemployment may appear at year’s end.”
“If we see employment growth slowing,” said Brown. “If it were to slow down to 200,000 in the next few months, and we see more entrants into the labor force, that is also going to be a good sign.”
That’d be the so-called “smooth landing” for the economy, said Brown.
But even though this softer landing is the goal of the Federal Reserve, said Walden, instead of the alternative of a “hard landing” which results in an economic recession, Americans won’t know the outcome of the economy until it’s occurring.