May Jobs Report: Job Gains are Back, But Wages Aren’t Keeping Up
May Jobs Report: Job Gains are Back, But Wages Aren’t Keeping Up
The May Employment Report confirms that the labor market is gaining traction. The economy added 172,000 jobs in May, unemployment held steady, and underemployment ticked down as more workers found the roles and hours they were looking for. Labor force participation remains low but stable. Taken together, the data suggest that energy is returning to a labor market that had been largely stagnant just in time for summer.
Job gains are back
May's results came in stronger than expected, and upward revisions to March (now +214K) and April (now +179K) reinforce that the rebound is becoming an established trend. Employers are already stepping up hiring activity.
Sector highlights:
Leisure and Hospitality led all industries with 70K jobs added ahead of the summer season.
Local government gained 55K jobs..
Healthcare and Social Assistance remained a consistent source of job growth, adding 47.2K jobs, though its share of overall gains dipped to 27%, down from 32% the prior month.
Financial Activities shed jobs in May, continuing a downward trend that mirrors the drop in job openings seen in the prior month's JOLTS data.
Unemployment and participation hold steady
Unemployment (4.3%) and labor force participation (61.8%) were essentially unchanged in May, a sign of stability, if not yet acceleration, in the broader workforce picture.
The composition of unemployment, however, tells a more interesting story. The share of unemployed workers who left their last job, a proxy for worker confidence, rose to its third-highest level in four years. Meanwhile, job losers declined, consistent with the low layoff levels reported in JOLTS. Workers are starting to move, and more of those moves appear to be voluntary.
Underemployment also improved. Workers employed part-time for economic reasons fell by 137K, and short-term unemployment (five weeks or less) dropped by 286K, both pointing to faster absorption of job seekers as new openings emerge. The one area of concern: long-term unemployment (27+ weeks) rose by 155K, suggesting employers are drawing disproportionately from the fresher end of the talent pool. Workers who have been searching for months continue to face steeper headwinds and a more challenging job search than headlines suggest.
Wages aren't keeping up
Despite the uptick in market activity, workers have yet to translate that momentum into meaningful bargaining power. Average hourly wages grew just 3.4% in May, now running below inflation. With energy prices still elevated, that squeeze falls hardest on the low- and middle-income households, who spend a greater share of income on fuel and food.
Perhaps more structurally concerning, wage growth is increasingly decoupling from productivity gains. As hiring picks up and output rises across the U.S. economy, workers are not seeing a proportional share of those gains reflected in their paychecks, a dynamic that, if it persists, could dampen the consumer confidence that a durable recovery will ultimately require.