Labor market still a source of strength for the economy
U.S. nonfarm payrolls rose at a higher-than-expected rate in May, gaining 390,000 jobs. Though the pace of growth has moderated, the labor market overall has remained robust, with a low rate of unemployment, according to the Bureau of Labor Statistics.
Leisure and hospitality made the biggest gains with 84,000 jobs, reflecting an increase in spending by consumers on services and travel. Education and health services have also made big gains, as well as transportation and warehousing. Notably, professional and business services saw a gain of 75,000 jobs in May – an indicator CONTI Capital always looks for, as the availability of higher-paying jobs in the professional realm are a positive for the demand of high-end apartment assets.
Meanwhile, retail jobs declined by 60,700, likely due in part to falling sales at big box stores like Walmart and the declining footprint of electronics stores and office supply stores. While consumers have been willing to spend more on services and entertainment in recent months, spending on general merchandise has been less enthusiastic, according to a CONTI analysis of Census data.
Unemployment stayed steady at 3.6% for the month, though the number of people unemployed for a long period of time (27 weeks or more) declined slightly. The long-term unemployed still exist in higher numbers today than they did just prior to the COVID-19 pandemic.
CONTI prefers to monitor the labor force participation rate (LFPR), which serves as a more reliable indicator of the strength of the labor market because it accounts for both the employed and those actively searching for a job. Though we’ve seen little change in the LFPR this month, it’s still about a percentage point lower than it was prior to the pandemic, demonstrating the lasting effects of a large swath of workers leaving the workforce amid the pandemic upheaval.
The U.S. labor market continues to be one of the strongest pillars of the U.S. economy, as workers are still in high demand and wages have increased. Though these measures aren’t shooting upwards at the rate we’d seen in 2021, this moderation is to be expected considering the Federal Reserve’s efforts to cool down the economy and curb price inflation.