PREVIEW: What to Look for in the May Jobs Report

06/02/2021 12:00am

(The monthly Employment Situation is scheduled for release by the Bureau of Labor Statistics on Friday, June 4 at 8:30 AM Eastern Time.)

In May, we should see the sort of strong job gains that many of us had expected in April. This is partly because the economy is growing rapidly by most measures. Also, many of the anomalies that held down employment growth in April will not likely recur and may be partially reversed.

For example, there was a reported loss of 111,400 jobs in the temp sector in April. There were 77,400 fewer jobs in the courier industry. Grocery stores lost 49,400 jobs. And car manufacturers lost 28,000 jobs. In addition, state and local governments added just 39,000 jobs, mostly in education, leaving employment in the sector 1,278,000 below the pre-pandemic level.

If we don’t again see such strikingly large job loss in these sectors, and we see governments add back say 200,000 jobs, as more schools reopen, then we would be looking at close to 700,000 jobs in May, with April’s pace of job growth in other sectors. We could do considerably better as hard-hit sectors like restaurants and hotels add back more workers. It is also worth remembering that revisions have been quite large since the pandemic hit, so the April data may be substantially revised this month.

Wage Growth and Weekly Hours

There is some evidence that employers are having difficulty finding workers, but less than is often claimed. Year-over-year comparisons are skewed by a composition effect, with many of the lowest paid workers not being counted. If we look at the average of the last three months (February, March, April) compared with the prior three months (November, December, January), wages have risen at just a 3.1 percent annual rate.

There is more rapid growth in some low-wage sectors. The annual rate of wage growth comparing the last three months with the prior three months was 4.1 percent for production and nonsupervisory workers in retail, and 17.6 percent for the leisure and hospitality sector. These data are erratic, but they do indicate some acceleration in wage growth, especially for hotels and restaurants. It will be important to see if this continues and also whether the earlier numbers may be revised downward.

There also has been some increase in average weekly hours, which is consistent with it being difficult to find workers. Average weekly hours for production and nonsupervisory workers was 34.4 in April, up from 33.7 in February 2020. But this is the same as the level in January of this year, so it is not consistent with a worsening problem. For hotels and restaurants, the workweek averaged 25.3 hours, up from 24.7 before the pandemic.

Employment Coming Back in Hard-Hit Sectors

Employment in restaurants in April was still 1,666,000 below its pre-pandemic level (13.5 percent) even as sales were almost back to their February 2020 pace. Employment in hotels was down 569,000 (27.0 percent). In percentage terms, the motion picture industry has been hardest hit, down 39.9 percent, or 176,000 jobs from pre-pandemic levels. It may be somewhat longer before movie production gets back to pre-pandemic levels. 

Ending of Unemployment Insurance Supplements Not a Factor in May Jobs Data

Many Republican governors decided to end the $300 weekly unemployment insurance supplements, claiming that they discouraged people from looking for work. Some also ended the special pandemic programs created for gig workers and others who would not ordinarily be eligible for benefits. The May data will not be reflecting the impact of these changes since they were, for the most part, implemented after the May 12th reference period.  

Women Returning to the Workforce

As more of the population is vaccinated, more workers will feel comfortable returning to their jobs, and more pandemic restrictions on businesses are being removed. Women’s share of payroll employment dropped from 50.03 percent before the pandemic to 49.74 in April. It had been as low as 49.14 percent in April of 2020. The women’s share of employment should increase in May as the recovery continues.

Long-Term Unemployment

An extraordinarily large share of unemployment in this recession has been long-term (more than 26 weeks). There was a small drop in the share of long-term unemployment in April to 43.0 percent from a recession peak of 43.4 percent in March. It is likely this share will drop further in May, as many long-term unemployed now have the chance to return to work.

Quits

The share of unemployment attributed to people who voluntarily quit their job is usually considered a good measure of the labor market’s strength, since it indicates workers are willing to quit a job without having a new job lined up. This share had been extraordinarily low in the pandemic recession, but has been rising.

In April, it rose to 8.3 percent from 8.0 percent in March. This is still very far from what we expect in a healthy labor market. It was over 14.0 percent before the pandemic hit.

CEPR produces same-day analyses of government data on inflation, employment, GDP and other topics. 
Follow @DeanBaker13 on Twitter to get his quick-take analysis of government data immediately upon release.

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