United States: the labor market remains solid in May, the clouds still seem distant


“We’re hiring” signs in front of restaurants in Rehoboth Beach, Delaware on March 19, 2022 (AFP/Archives/Stefani Reynolds)

The labor market in the United States was solid in May and workers remain in a position of strength despite slow job creation, but the fight against inflation should change the situation in a few months.

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 less than the 436,000 in April (data revised upwards), but better than the 325,000 that were expected by analysts.

The unemployment rate remains unchanged at 3.6%, and we will therefore have to wait a little longer to see it return to 3.5%, its level of February 2020, before the Covid-19 pandemic, when it was at its lowest. for 50 years.

During a speech in Delaware, President Joe Biden assured Friday that it was possible to control inflation “without sacrificing” employment given the strength of the labor market in May.

“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.

“There are still millions more job openings than people available to fill them, and wage growth remains strong,” he said.

The hourly wage continued to increase, albeit at a slower pace, and now stands at 31.95 dollars per hour on average, +0.3% over one month and +5.2% over one year.

President Joe Biden in Rehoboth Beach, Delaware on June 3, 2022

President Joe Biden in Rehoboth Beach, Delaware on June 3, 2022 (AFP/MANDEL NGAN)

But the slowdown is for managers, observes Diane Swonk, chief economist for Grant Thornton, who points out that for others, wage growth has “actually accelerated in the month, to 6.5% year-on-year, close to of the annual rhythm observed in April”.

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.

– Degradation to be expected –

The leisure and hospitality, business services, transportation and warehousing sectors were the main job creators last month, while the retail trade destroyed jobs, says the Labor Department in a press release.

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. “.

A We're Hiring sign at a department store in Annapolis, Maryland on May 16, 2022

A “we’re hiring” sign at a department store in Annapolis, Maryland on May 16, 2022 (AFP/Archives/Jim WATSON)

The fight against inflation could, however, cause unemployment to rise again, and slow economic growth, or even cause a recession. Because to curb this rise in prices, one of the main levers is to slow down demand from consumers and businesses.

For this, the American central bank (Fed) is on the move, and is gradually raising its key rates, which sets the tone for commercial banks, which, in turn, offer their customers loans at higher rates.

“While labor market conditions are expected to remain strong in the near term, labor demand is expected to decline later this year as businesses face higher costs, reduced consumer demand and lower profitability. weaker”, anticipates Kathy Bostjancic, economist for Oxford Economics.

The sectors which are likely to be the first affected are, according to her, those “sensitive to interest rates, such as construction and manufacturing”, or “vulnerable to the fact that consumers will buy fewer goods, such as trade. retail, transportation and warehousing”.

However, she believes that more workers could start looking for jobs again, which “should ease further upward pressure on wages in the second half of the year”.

© 2022 AFP

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