3 Key Takeaways From The May U.S. Jobs Report

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On the latest edition of Market Week in Review, Chief Investment Strategist Erik Ristuben and Senior Client Investment Analyst Chris Kyle discussed the May U.S. employment report, recent purchasing managers’ index (PMI) surveys from around the globe, and the outlook for equity markets through the rest of the year.

The U.S. adds 559,000 jobs as unemployment rate ticks below 6%

On June 4, the U.S. Bureau of Labor Statistics reported that the nation added 559,000 jobs during the month of May, Ristuben said, with the unemployment rate dipping to 5.8%. “Job gains in May roughly doubled what was seen in April, when the U.S. added 271,000 new nonfarm payrolls,” he noted. In almost any other time, the May report would have been viewed as wildly positive, Ristuben said—but not in the era of COVID-19, where over 7 million American jobs lost during the early months of the pandemic have yet to return.

The May numbers fell short of consensus expectations for 650,000-plus new jobs, he stated, adding that the error rate on monthly job estimates over the last six months has been tremendously high. “There’s been a lot of month-to-month volatility in U.S. job growth due to the uneven pace of the recovery, and because the numbers are generally quite large to begin with,” Ristuben explained.

One of the biggest positive takeaways from the report came from the leisure and hospitality industry, he noted, with restaurants and bars adding 186,000 jobs last month alone. “That’s a sign that life in the U.S. is returning closer to pre-pandemic norms, as restrictions are lifted and more and more Americans begin dining out again,” Ristuben remarked.

He noted that inflation pressures also cropped up in the May report, with average hourly earnings rising by about 0.5% on a monthly basis. “That’s a pretty big increase and something to keep an eye on,” Ristuben said. However, he stressed that with the unemployment rate still significantly above pre-pandemic levels, there’s still a fair amount of slack in the labor market. “This is one of the factors that I believe will help keep inflation in check through 2022,” Ristuben stated.

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