The U.S. economy added back 559,000 jobs in May as hiring undershot Wall Street expectations despite easing Covid restrictions. Wage growth continued to surge in the leisure and hospitality sector amid an apparent shortage of available workers. Still, the Dow Jones rose in Friday stock market action as the 10-year Treasury yield slid following the jobs report.
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Following April’s record 2.7% jump in average hourly pay among rank-and-file leisure and hospitality workers, pay rose another 1.2% in May. That’s lifted the average hourly wage among these workers 4% to $15.87 from $15.26 in just two months.
Among all production and nonsupervisory workers, wages have climbed 33 cents, or 1.3%, over two months to $25.60 an hour.
“The rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” the Labor Department said.
Private-sector payrolls rose 492,000 in May, while government jobs rose 67,000. The unemployment rate fell to 5.8% from 6.1%.
Wall Street expected the May jobs report to show a gain of 650,000 jobs overall, including 625,000 private-sector jobs. Economists expected the unemployment rate to fall to 5.9%.
Job gains for March and April were revised up by a combined 27,000. April’s initially reported 266,000 gain was revised to 278,000.
The May employment report data comes from mid-month surveys of employers and households. The more timely weekly jobless claims report suggests progress continued later in May. Initial jobless claims fell to a Covid-era low of 385,000 in the week through May 29, down from 507,000 four weeks earlier.
The latest jobs data doesn’t fully reflect moves by many GOP-led states to coax reluctant workers back into the job market by ending emergency jobless benefits that are providing an extra $300 per week. Those changes won’t take effect until later in June or July.
Dow Jones, Treasury Yields React To Jobs Report
After the jobs report, the Dow Jones rose 0.3%. The S&P 500 gained 0.6% and the Nasdaq composite climbed 1.2%.
The Dow and S&P 500 closed within about 1% of record highs on Thursday. The Nasdaq, which has underperformed since mid-February amid rising interest rates, closed about 4% off its peak.
The 10-year Treasury yield fell 5 basis points to 1.57% on Friday morning. It hit a Covid-era high of 1.77% on March 30, but the disappointing pace of job growth has outweighed rising inflation pressure since then.
Friday’s weaker-than-expected jobs report may mean that the Federal Reserve kicks the can on a discussion about when to taper asset purchases when it meets June 15-16.
Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the stock market trend and whether investors have a green light for buying quality stocks at a proper entry point.
Jobs Report Details
The leisure and hospitality sector regained 292,000 jobs. Within that sector, food and drinking places added back 186,000 jobs, while hotels and motels hired back 34,600 workers.
Factory employment grew by 23,000. Educational services firms added 40,700 jobs. Child day care service jobs rose by 18,300.
However, the retail sector shed 5,800 jobs, and construction jobs fell by 20,000.
Unemployment Rate
The household survey, which is used to derive the unemployment rate, showed the ranks of the employed rising 444,000, while the unemployed fell by 496,000. The ranks of Americans not in the labor force rose by 160,000.
The lower unemployment rate in May resumed the downward trend after the jobless rate hit 14.7% in April 2020. Yet that understates the progress. The Labor Department estimated that unemployment would climbed as high as 19.7%, if workers hadn’t been misclassified as being employed but not at work.
According to the monthly survey of households, 9.3 million Americans are unemployed, down from 23.1 million in April 2020, but up from 5.8 million in February 2020.
Please follow Jed Graham on Twitter at @IBD_JGraham for coverage of economic policy and financial markets.
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