Though the pickup in job growth shown in the Labour Department’s closely watched employment report yesterday missed economists’ forecasts, it gave assurance that the recovery from the pandemic recession remained on track. — Reuters pic
Though the pickup in job growth shown in the Labour Department’s closely watched employment report yesterday missed economists’ forecasts, it gave assurance that the recovery from the pandemic recession remained on track. — Reuters pic

WASHINGTON, June 5 — US employers increased hiring in May and raised wages as they competed for workers, with millions of unemployed Americans still at home because of childcare issues, generous unemployment checks and lingering fears over Covid-19.

Though the pickup in job growth shown in the Labour Department’s closely watched employment report yesterday missed economists’ forecasts, it gave assurance that the recovery from the pandemic recession remained on track.

The economy is being supported by vaccinations against the virus, massive fiscal stimulus and the Federal Reserve’s ultra-easy monetary policy stance. April’s nonfarm payrolls count, which delivered about a quarter of the new jobs economists had forecast, caused handwringing among some analysts and investors that growth was stagnating at a time when inflation was rising.

“There are still a lot of people unemployed, but there does not seem to be a lot of eagerness to work,” said Chris Low, chief economist at FHN Financial in New York. “There would have been many more hires if employers could find more people.”

Nonfarm payrolls increased by 559,000 jobs last month after rising 278,000 in April. That left employment about 7.6 million jobs below its peak in February 2020. Economists polled by Reuters had forecast 650,000 jobs created in May. About 9.3 million people were classified as unemployed last month. There are a record 8.1 million unfilled jobs.

With at least half of the American population fully vaccinated, authorities across the country have lifted virus-related restrictions on businesses, which nearly paralysed the economy early in the pandemic. But the reopening economy is straining the supply chain.

READ  Long-term mortgage rates dip; 30-year at 3-year low of 3.49%

Though women took 56.2 per cent of the jobs created last month, they constitute a large share of the millions of workers still at home as most school districts have not moved to full-time in-person learning. Nearly 1.8 million women have left the labour force since February 2020.

Despite vaccines being widely accessible, some segments of the population are reluctant to get inoculated, discouraging some people from returning to work. Government-funded benefits, including a US$300 (RM1,238.40) weekly unemployment subsidy, are also constraining hiring.

Republican governors in 25 states, accounting for more than 40 per cent of the workforce, are terminating this benefit and other unemployment programmes funded by the federal government starting next Saturday.

The expanded benefits end in early September across the country, which together with more people vaccinated and schools fully reopening in the fall, is expected to ease the worker crunch.

Labour Secretary Marty Walsh said claims that enhanced benefits were discouraging jobseeking were not supported by what workers were telling him.

“Working people across America are eager to work,” said Walsh in a statement. “But workers also told me about the challenges they and their families face, finding affordable childcare, caring for elderly parents and grandparents”

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. US Treasury prices rose.

Willing workers scarce

But labour shortages could remain a fixture. A US Chamber of Commerce survey yesterday showed 61 per cent of unemployed people were in no hurry to return to work. Three in 10 said they did not expect to resume working this year, with nearly half of those indicating they never plan to work again.

READ  US warns vessels transiting Gulf amid tensions with Iran

Average hourly earnings rose a solid 0.5 per cent after shooting up 0.7 per cent in April. That raised the year-on-year increase in wages to 2.0 per cent from 0.4 per cent in April. Wages in the leisure and hospitality sector jumped 1.3 per cent, the third straight month of gains above 1 per cent.

Postings on Poachedjobs.com, a national job board for the restaurant/hospitality industry, are showing restaurants offering as much as US$30-US$35 per hour for lead line cooks.

Sustained wage growth could strengthen the argument among some economists that higher inflation could persist rather than being transitory as currently envisioned by Fed Chair Jerome Powell. A measure of underlying inflation tracked by the Fed for its 2 per cent target accelerated 3.1 per cent on a year-on-year basis in April, the largest increase since July 1992.

Still, most economists do not expect the US central bank to start withdrawing its massive economic support anytime soon.

“It is unlikely to convince Powell that progress has been ‘substantial’ enough just yet to start signaling tapering,” said Kevin Cummins, chief US economist at NatWest Markets in Stamford, Connecticut.

The average workweek held steady at 34.9 hours. That together with strong wage gains lifted an income proxy 0.9 per cent, matching April’s gain. This bodes well for consumer spending, which could also get a powerful tailwind from the more than US$2.3 trillion in excess savings amassed during the pandemic.

Economists are sticking to their forecasts for double-digit growth this quarter.

Last month’s increase in hiring was led by the leisure and hospitality industry, which added 292,000 jobs, with restaurants and bars accounting for 186,000 of those positions. Local government education employment rose by 53,000 jobs as the resumption of in-person learning and other school-related activities in some parts of the country continued.

READ  US stocks add to records; FedEx slumps

Manufacturing payrolls increased by 23,000 jobs. But construction employment decreased by 20,000 jobs.

The unemployment rate fell to 5.8 per cent from 6.1 per cent in April. The drop was in part due to 53,000 people leaving the labour force. The jobless rate has been understated by people misclassifying themselves as being “employed but absent from work.” Without this problem, the unemployment rate would have been 6.1 per cent and about 8.5 per cent accounting for those outside the labour force.

The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 61.6 per cent from 61.7 per cent in April. Men dropped out of the labour force last month, while 204,000 women returned. — Reuters



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here