Although the latest Bureau of Labor Statistics report on Friday showing the U.S. economy adding an estimated 559,000 jobs in May was more than 100,000 lower than the consensus estimate of economists, President Joe Biden promptly took a victory lap.
“We’re on the right track, our plan is working, and we’re not going to let up now,” Biden said in remarks Friday morning that were notably more positive than a month ago, when a lower-than-expected jobs report had him warning that the country had “a long way to go.”
Speaking from Rehoboth Beach, Delaware, Biden gave credit to both the American people and the economic recovery package championed by his administration.
“No other major economy in the world is growing as fast as ours,” Biden said. “No other major economy is gaining jobs as quickly as ours. And none of this success is an accident. It isn’t luck. It’s due in no small part … to the cooperation of the American people in responding to my effort to get COVID under control, wearing a mask initially and getting vaccinated.”
Republicans focused on the fact that the jobs report had not met the consensus estimate, and used that fact to criticize Biden’s handling of the economy.
“As we emerge from the virus, our economy should be booming, but today’s lackluster jobs report shows President Biden’s policies have stalled our recovery,” House Minority Leader Kevin McCarthy wrote on Twitter. “Washington needs to stop paying people NOT to work. Bidenomics is bad for America.”
The government report Friday indicated that the unemployment rate in the U.S. fell to 5.8% from 6.1%, the lowest it has been since pandemic lockdowns shuttered the economy last year, triggering the first in a series of economic relief bills. However, there are still signs that employers are having difficulty filling open jobs, as hourly wages continued to increase.
Here are five major takeaways from the current employment situation in the U.S.:
Good news for global economy
Strong job growth in the United States is very good news for the rest of the world, experts said. The sheer size of the U.S. economy makes it the engine that powers much of the global trade in goods and services, and as consumption in the U.S. rises, other countries can expect to see that reflected in greater demand for exports.
“The U.S. is going to provide a strong source of demand for the products of many other countries over the period ahead,” said economist David Wilcox, a senior fellow at the Peterson Institute for International Economics. “Strong demand from the U.S. will help power forward the recovery in some other countries that are not doing as well.”
And that is a “win-win” for the U.S. and the rest of the world, he said, because the availability of imported goods and services “will provide a welcome pressure valve” that can help the U.S. economy avoid “overheating.”
Worker ‘shortage’ is global
There has been much debate in the U.S. over the cause of the difficulty that some businesses are encountering as they try to fill open jobs. Many have pointed to generous COVID-19 relief payments to workers as part of the reason employers are having to pay people more to come back to work.
However, in an interview on CNBC Friday morning, Manpower Group Chairman and CEO Jonas Prising said that data collected by the global staffing firm shows that while government payments in the U.S. may be a contributing factor, the problem is global, with 70% of companies struggling to find skilled labor. This, he said, suggests that the real issue is that the speed of the recovery has caught some workers by surprise.
“The reason the shortages are so strong is that the economic recovery from businesses is stronger than we anticipated … and that means a lot of the activities that were under lockdowns are coming back very quickly, and workers are still dealing with issues around health care concerns and child care,” he said.
“I think this is something that is an anomaly and that will work itself out,” he added. “By the fall we should be back to seeing behavior in labor markets that will be consistent with what we would be expecting.”
Recovery remains uneven
While the top-line jobs number is undoubtedly positive, gains in employment are not equally distributed across the U.S. working population. In May, the unemployment rates for teenagers, whites and Hispanics all fell. But among adult men, adult women, Blacks and Asians, the number hardly changed.
Jobs are also returning to different industries at different speeds. In May, the leisure and hospitality industries added 292,000 jobs, while education, health services and government sectors enjoyed strong gains. By comparison, the construction industry lost jobs, and there was no substantial growth in retail trade, finance, or mining and logging.
It is also important to note that even though the economy has shown strong job growth over the past several months, the United States still has approximately 7.5 million fewer jobs than it did before pandemic lockdowns began in February 2020 and is several million more short of where it would have been without the disruption due to the pandemic.
Not much news about inflation
While rising wages can be a precursor to inflation, it’s far from clear that that’s the message to take from Friday’s report. U.S. policymakers still believe much of the inflation consumers are experiencing is temporary and will resolve itself as the economy resets itself and supply chain bottlenecks are resolved.
When it comes to inflation, “the stakes are high for essentially everyone concerned,” said Mark Hamrick, senior economic analyst for Bankrate.com. “But within the context of this being a highly unprecedented situation, I think that it’s going to require some patience just to see how things unfold over the intermediate term, which I would define as 12 to 18 months.”
Some wage increases are probably overdue regardless of the pandemic, he said, and the evidence of the past decade has convinced many economists, including some with the Federal Reserve, that the ties between inflation and wages may not be as close as they once believed.
“I think, you know, if we could live in a world where we see some wage gains that can peacefully coexist with inflation, that isn’t regarded as problematic, that’s a pretty good place to be,” he said.
Expect the unexpected
In his remarks Friday morning, Biden cautioned Americans to expect some unevenness in the months ahead, saying, “As we continue this recovery, we’re going to hit some bumps along the way. … We can’t reboot the world’s largest economy like flipping on a light switch.”
Experts largely agreed with him, pointing out that both the U.S. and global economies are in uncharted territory.
“The reality is that we’re living in highly uncertain and unprecedented times, and we should expect that the things we see will be unexpected,” said Hamrick. Restoring the U.S. economy to its former condition, he said, “is not the work that can be done in 12 months.”