The labor market continues to be strong. The U.S. added 390,000 jobs in May, while the unemployment rate held steady at 3.6%. Julia Pollak, Chief Economist for ZipRecruiter, breaks down the latest data and what it means for the economy. 


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U.S. Added 390,000 Jobs In May As Labor Market Remains Strong

here with some more insight is Julia Pollock, chief economist for Zip ricotta Julia. When you look at this report this morning, I described it as a bit of a goldilocks scenario, it was a pretty, not too hot, not too low, what was your read on it? This is exactly what the Fed wants to see. Rapid wage growth, the boil coming off wage growth a little bit. All because labor force supply is growing a little bit. That has been the big constraint for companies, you know, businesses are trying to hire, there's white hot demand for workers but they're being held back by very rapid turnover and labor shortages but it looks like labor force participation is easing, it's picking up its recovering and that is good news all around. This does seem like what the Fed was hoping for in terms of a slowdown in the pace of hiring but not too slow to to say to signal that we're in some type of trouble here. Um but you know, I looked at some of the underlying numbers to numbers that I was focusing on obviously wage inflation and the other one. Labor force participation both ticked up just slightly higher. Labor force participation 62.3% And then wage that was up about 3/10 of a percent a little bit under expectation. But I think to your point exactly what the Fed needed to see in order to I guess continue with this hawkish stance on one hand again this is good for the Fed, not so good for the worker. How do we reconcile what is good for the overall economy, but not what's best for kind of us right now. Again, wage inflation not keeping up with average inflation Right? So overall wages are not keeping pace with inflation, but I mean these these wage growth numbers are still very high in leisure and hospitality and in trade and transportation, uh we've seen wage growth above 10% in leisure hospitality for 10 straight months among nonsupervisory employees in those industries, it's even higher. So there, I mean, there is continued upward pressure on on wages. Companies are finding it very, very difficult to compete for workers unless they raise wages pre substantially. And many companies are now raising wages not just to attract new hires, but to retain their existing workers, They're doing overhaul sort of overhauls of their pay structures. Um and and overall uh pay audits, competitiveness audits in order to keep their workers going from how the Fed is looking at this report to how employers are looking at this report from that perspective. How are employers able to keep adding jobs in the face of what is still higher inflation? They're having to pay more workers even more in certain sectors of the job market. Um And then there's this continued concern of a possible recession and the Fed not hitting that soft landing from an employer perspective, how do read this? So what was interesting here is that we saw such broad growth, the the most interest rate sensitive industries are not pulling back just yet. We didn't see a decline in retail as you know, people are kind of going back to to normal uh behavior and going back towards services, but there, you know, there's still great strength across the board, You know, what's been amazing with with the the recent gains is how resilient and robust they have been, how durable they have been before the pandemic in 2018 and 2019, the economy could have added just 110, jobs a month to keep pace with population growth. And yet it consistently added more than 200,000 jobs and uh and wage growth built over that period. Um and there was no inflation, right? And it looks like we might be getting back there where we have solid, solid job growth, solid wage growth, but because labor force participation is going up, uh you know, the the pressure is on the economy that we saw in 2021 and early 2022, it could be easing somewhat. Yeah, that again, the labor force participation number 62.3%. Pre pandemic, 62.4%. So we're getting pretty close to where we at where we were at before the pandemic, but I think about that and I think about this many people who left the labor force during the pandemic despite this participation being up, have yet to return. What's the catalyst for that return? When do we expect that to truly shift in a more reasonable or more toward expectations. So labor force participation has fully, fully, fully recovered among teenagers and pretty much recovered fully among prime age workers. It's still down about 3.5% points though among older workers, those above age 55. Many people who were laid off in that category cast their layoffs as retirement because it was so close to retirement age. Uh and uh and many of them have moved states and retired in lower cost places. And so there are barriers to them returning like occupational licensing, uh state restrictions on them resuming their jobs. We know that most people who retired, about half of people who retire later unretired or only partially retire. And so many of these people would come back to work if they could. And if the conditions were right now, there are ways in which remote work is making the conditions more attractive for those people to come back. Many of them like to work part time or under flexible conditions. And in this tight labor market, employers are not only raising wages, but they are providing more flexibility. We surveyed workers who were hired in the last six months and asked them how things changed for them. and 41% said that when they switch jobs, they gained more schedule flexibility. That's a major way for employers to and maybe for that higher age demographic. It gets that participation up a little bit more Julia, really appreciate your time and your insight, Julia Pollock, chief economist at ZIP recruiter.