Private-sector payroll firm ADP reported that employers added 978.000 jobs in May, following April’s gain of 742,000, while the number of Americans filling first-time unemployment claims last week fell below 400,000.
The job gains were dominated by the services sector, which added 850,000 positions, with increases occurring evenly among businesses of all sizes. The leisure and hospitality sectors led the increase, with 440,000 new jobs, while trade, transportation and utilities posted gains of 118,000 and education and health increased by 139,000.
Political Cartoons on the Economy
The strong report could be a harbinger of what the Labor Department reports on Friday with the May nonfarm payrolls reading, after April’s disappointing addition of only 266,000 jobs, well below the million forecast.
“Private payrolls showed a marked improvement from recent months and the strongest gain since the early days of the recovery,” said Nela Richardson, ADP’s chief economist. “While goods producers grew at a steady pace, it is service providers that accounted for the lion’s share of the gains, far outpacing the monthly average in the last six months. Companies of all sizes experienced an uptick in job growth, reflecting the improving nature of the pandemic and economy.”
Meanwhile, the first-time claims number fell to 385,000, a decrease of 20,000 from the previous week’s revised level, the Labor Department reported Thursday. This is the lowest level for initial claims since March 14, 2020, when it was 256,000.
The four-week moving average was 428,000, a decrease of 30,500 from the previous week’s revised number and is the lowest since March 14, 2020, when it was 225,500. The previous week’s average was revised down by 250 from 458,750.
While jobs are plentiful, with a record 8.1 million openings, there have been widespread reports of labor shortages with an overwhelming majority of large businesses reporting difficulty finding workers.
In response, employers are finding they have to raise wages or offer incentives like hiring bonuses, or both, to entice applicants.
“Over the past 10 months, most workers who dropped out of the labor force indicated that they had retired, suggesting that recent decreases in labor force participation are likely to persist even after the economy fully reopens,” economist John Leer wrote. “Faster job growth is necessary over the summer to replace lost income from expiring federal unemployment benefits and to repay missed mortgage and rent payments.”
Mark Hamrick, senior economic analyst at Bankrate, wrote Wednesday that the pandemic has brought about a new sense of thinking about work among workers.
“The pandemic has brought a reckoning or epiphany for workers, managers and business leaders that enterprises must foster better cultures and work conditions, more broadly,” Hamrick wrote. “Yes, employees want reasonable pay, but [they] also want supportive environments that don’t overlook things like childcare and mental health.”
“The changes include taking lessons learned from remote work and applying them toward a reset for processes and expectations for the future, which will include a hybrid model for many operations,” Hamrick added. “Ultimately, these changes can yield higher productivity and more employee retention, which benefit everyone.”
