Modest U.S. Jobs Report Still Leaves Big Question Unanswered

There was a modest increase in the number of new jobs added during May, around the lower end of expectations among analysts, doing little to settle the debate that is raging about the impact of higher payments to those who are unemployed on employers' ability to hire.

The Bureau of Labor Statistics (BLS) said nonfarm payroll employment rose by 559,000 in May, taking the unemployment rate down by 0.3 percentage points to 5.8 percent. It is a marked improvement on April's 278,000 figure, but not quite the bounce many had hoped for.

A fundamental question remains the same: to what extent is the enhanced unemployment benefit stopping people from filling vacancies? That $300 enhancement expires in September, though 25 states have opted out of the additional federal benefit in June.

Republican governors see the unemployment enhancement, part of America's gargantuan stimulus effort to help people through the pandemic's economic destruction, as a hindrance to their plans to return to normal, arguing it deters the jobless from filling vacant positions.

Andrew Hunter, senior U.S. economist at Capital Economics, thinks a number of factors are likely behind the labor shortages, though these should soon ease.

They include ongoing health fears about catching the virus; childcare problems because many schools are either closed or running limited in-person timetables; travel restrictions deterring seasonal immigrant workers; and the enhanced unemployment insurance leaving people able to claim as much or close to what they would otherwise earn.

"The biggest political impact the payrolls number will have is probably on the debate over whether enhanced federal unemployment insurance payments are discouraging people from returning to work and contributing to the widespread reports of labor shortages," Hunter told Newsweek.

He added that the state-level breakdown of jobs data in a few weeks will help to see if those states that opted out of the enhanced unemployment benefit saw any impact on hiring.

"The impact of this change should be visible in the July employment data, but it's possible that June will also see some impact," said a note from Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"We expect some people to start looking for a job before the benefit ends, hoping to avoid being caught in a wave of applicants for open positions."

The BLS data also showed that the labor force participation rate was little changed at 61.6 percent in May "and has remained within a narrow range of 61.4 percent to 61.7 percent since June 2020."

Its report continued: "In May, the number of persons not in the labor force who currently want a job was essentially unchanged over the month at 6.6 million but is up by 1.6 million since February 2020...

"The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, was 600,000 in May, little changed from the previous month but 199,000 higher than in February 2020."

"In some ways, the hiring rebound over the past year, as part of the broader reopening of the economy, ends up being a good news, but less than perfect story," said Mark Hamrick, senior economic analyst at Bankrate.

"The reason is that businesses and consumers are being constrained, at least to some degree, in engaging as fully as they would like because of challenges associated with supply chains and labor.

"Nevertheless, these challenges seem like a small price to pay in the battle against COVID-19 along the way to resuming activities previously taken for granted."

Anyone hoping that shaky jobs data for May, off the back of April's bad report, would have led to a fourth stimulus check from the federal government was probably always in for disappointment.

Shepherdson told Newsweek: "There won't be any further stimulus checks, no matter what happened to May payrolls. That's over."

Hunter said: "I don't think there's much prospect of a fourth stimulus check either—while a strong or weak report would clearly lead to claims that the economy does (or doesn't need more support), I think in general there is an acknowledgment now that fiscal policy has already provided huge support to households and business and can't really do much more at this stage.

"What matters now is encouraging the remaining unvaccinated people to get their shots and lifting the remaining virus-related restrictions on activity."

Update 6/04/21, 9:21 a.m. ET: This article was updated with more data from the BLS.

California man walks past help wanted sign
A 'Help Wanted' sign is posted beside Coronavirus safety guidelines in front of a restaurant in Los Angeles, California on May 28, 2021. There is a question about the extent to which enhanced unemployment benefit is stopping people from taking up a growing number of vacancies on offer across the U.S. as states relax their COVID-19 restrictions are start returning to normal. FREDERIC J. BROWN/AFP via Getty Images

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