The labor market in the United States remained solid in May with workers still in a strong position, but the fight against inflation could change the situation in a few months, although Joe Biden considered it possible to control it without sacrifice employment.
In May, 390,000 jobs were created in the private and public sectors combined, according to data from the Labor Department released on Friday. This is lower than April’s 436,000 (data revised upwards), but better than expected.
The unemployment rate remains unchanged at 3.6%, still above its pre-pandemic level when it was 3.5% in February 2020, the lowest in 50 years.
Joe Biden on Friday hailed the job market as “the strongest since the period immediately following World War II”.
And, while the economic priority of the American president is now to curb inflation, which has reached levels not seen in 40 years at more than 8%, he considered it possible to control it “without sacrificing” employment.
The fight against inflation is in fact likely to cause unemployment to rise again, and slow down economic growth, or even cause a recession. One of the main levers of the American Central Bank (Fed) is to slow down demand from consumers and businesses.
To do this, it is gradually raising its key rates, which sets the tone for commercial banks which, in turn, offer their customers loans at higher rates.
Inflation slowed somewhat in April, after hitting 40-year highs in March. It nevertheless remains very high, at 8.3% over one year, according to the CPI index.
– Labor shortage –
But the consequences on employment will probably only be felt in a few months.
Meanwhile, the May figures show “that the labor market and activity remain solid and that there are few signs of a slowdown in the economy”, commented Krishna Guha, economist for Evercore, a consulting firm in investments.
“By almost every measure, this is one of the strongest job markets of the past 50 years,” commented Mike Fratantoni, chief economist of the Mortgage Bankers Association.
“Job openings outnumber the people available to fill them by millions, and wage growth remains strong,” said Mike Fratantoni.
Indeed, employers who do not find enough workers in relation to the number of vacancies offer higher wages and better working conditions to attract candidates.
The hourly wage thus continued to increase, albeit at a slower pace, and now stands at $31.95 per hour on average, +0.3% over one month and +5.2% over one year. .
However, excluding management staff, wage increases have “actually accelerated”, observes Diane Swonk, chief economist for Grant Thornton.
– “Later this year” –
“The labor market situation should remain good in the short term”, anticipates Kathy Bostjancic, economist for Oxford Economics.
“Labour demand is expected to decline later this year,” she said, especially in sectors “sensitive to interest rates, such as construction and manufacturing”, or “vulnerable to the fact that consumers will buy fewer goods, such as retail, transportation and warehousing”.
She believes, however, that many people who had stopped looking for work could return to the labor market, which “should ease further upward pressure on wages in the second half of the year”.
The participation rate, that is to say the share of adults who are working or looking for a job, is improving a little, but, at 62.3% (+0.1 point compared to April), is still 1.1 points lower than its pre-pandemic level.
“As companies continue to struggle to compensate, retain and recruit new talent”, Gregory Daco, chief economist of EY-Parthenon, sees this as an “encouraging” sign, because it means that “the supply of labor -work rebounded in May”.
However, he specifies, “if there is one element which is still lacking in the labor market today, it is the supply of labour, and not the demand for labour. “.
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