The U.S. unemployment rate stalled at 3.6 percent for the third straight month after the Labor Department on Friday said employers added 390,000 jobs in May.
The 17th straight monthly gain comes amid concerns over rising labor costs, with average hourly earnings up by 10 cents, or 5.2 percent higher than a year ago. But May’s job additions underperform the 428,000 added in April. And retail cut 61,000 jobs, with apparel and accessories stores shedding 9,000 positions. But retail jobs were still 159,000 higher than in February 2020 before the pandemic reared its head.
The Conference Board said the data means the U.S. is essentially at “full employment.”
But ADP data suggests a slowdown is in the works. Private U.S. payrolls rose by 128,000 in May, representing the lowest nonfarm job gain during the post-Covid recovery.
According to ADP, small businesses shed 91,000 jobs in May, with hiring mostly at employers of 500 or more. By sector, manufacturing jobs rose by 22,000, but jobs at retail stores, under the “other services” category, increased by just 2,000.
“Under a backdrop of a tight labor market and elevated inflation, monthly job gains are closer to prepandemic levels,” ADP chief economist Nela Richardson said. “The job growth rate of hiring has tempered across all industries, while small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late.”
The Department of Labor on Thursday said people filed 200,000 first-time jobless benefit claims for the week ending May 28. That seasonally adjusted figure was 11,000 lower than the week before.
For now, the National Retail Federation doesn’t expect the economy to cool off.
“With changes underway that focus on taming inflation without splintering the economy, the nation’s economic system is in the process of being rebalanced in ways that are testing its resilience,” said Jack Kleinhenz, chief economist for the Washington, D.C.-based retail trade group. “This is an extraordinary period with unprecedented factors that include inflation at a 40-year high, uncertainty over the war in Ukraine, supply chain disruptions and the Federal Reserve raising interest rates. There’s good reason why businesses, consumers and policymakers alike all feel uneasy.”
Kleinhenz said there’s little evidence to suggest the economy is stalling, countering with claims that data points to growth.
Meanwhile, The Conference Board’s Consumer Confidence Index last week decreased slightly in May to 106.4 from 108.6 in April. While consumers were slightly more pessimistic about the current job market—51.8 percent said jobs were “plentiful,” down from 54.8 percent in April—they also were more upbeat about the jobs front six months out. Of the consumers surveyed, 18.5 percent said they expect more jobs to be available, marginally better than the 18.4 percent in April. And 18.7 expect fewer jobs, down from 19.8 percent.
A Moody’s Analytics report on Friday noted that despite a drop in the savings rate, higher inflation and rising gasoline prices, there is reason to be optimistic about consumer spending.
“Using payment card transactions data from the Bureau of Economic Analysis, weekly consumer spending isn’t showing any significant deceleration,” according to senior director Ryan Sweet and director Damien Moore, the report’s lead authors.
While it’s prudent to plan for a recession, an economic slowdown isn’t inevitable “nor it it the most likely path for the economy,” U.S. chief economist Mark Zandi said. In fact, the Fed’s aggressive actions have worked so far and inflation expectations have fallen in recent weeks.
“An even more significant reason to be optimistic that the economy will skirt a near-term recession is that none of the problems that typically plague the economy and cause or contribute to a downturn are evident today. Most obviously, in over 40 years of record keeping, American families currently devote the smallest share of their income to interest and principal payments on their debts,” Zandi said, adding that recession calls “are sure to get louder as the Fed continues working to rein in inflation and politicians running in the midterms portray the economy’s struggles to their advantage.”
Lower-income consumers are also disproportionately impacted by rising inflation. Last month Dollar General CEO Todd Vasos told Wall Street analysts that consumers don’t seem to be switching to cheaper goods quite yet but expects them to later this year if inflation doesn’t let up.