USA: The recovery of the labor market has entered a difficult phase

In May, job growth was 559,000, disappointing market expectations. According to Wells Fargo analysts, the May jobs report confirmed that the biggest challenge to the labor market recovery is the job itself.

Key statements:

“Job growth disappointed again in May, reaching 559,000. The payroll upward revision for April was negligible (+12,000), showing that the slowdown this spring is no fluke. Vacancies according to Indeed.com jumped further above their pre-pandemic baseline in May and small business hiring plans hit an all-time high, but record worker demand doesn’t do much good for the economy if businesses don’t they can fill those positions. “

“Despite the record demand for workers, the recovery of the labor market has entered a difficult phase. Businesses have reopened faster than workers can and want to return to work. More than a year after the onset of the pandemic, a declining proportion of unemployed workers are on temporary layoffs, meaning companies and job seekers must make new connections. That takes time. “

“We expect job growth to continue at what would at any other time be considered an impressive growth rate. The factors that limit the supply of workers have begun to decline or will soon decline. “

“The last two months of disappointing growth in employment illustrate that the recovery in employment is likely to be longer than previously thought. With payrolls still 7.6 million below their February 2020 peak, a full recovery seems unlikely until late 2022 or even early 2023. The more moderate pace of hiring will keep the Fed waiting a bit longer for “substantial advances. additional “on the labor market front, although firm wage pressures suggest the Fed may need to broaden its definition of progress.”