America's job market stays solid in May, but there are cooling signs

1 big thing: The mixed signals jobs report

crystal ball with graph arrow going up and then down

The end of the self-employment boom

2. The end of the self-employment boom

Happy jobs Friday! It was yet another blowout number for jobs gains. The report's details, though, paint a more nuanced picture of the labor market — further complicated by a huge drop in self-employed workers. Keep reading for more.

🗓 Programming note: Macro will take a break next week. We'll be back in your inbox the following week (with some exciting news!).

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 530 words, a 2-minute read.

Macro

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Stay ahead of the curve on the most important economic developments with reporting and analysis on how business, policy, and markets collide. With Courtenay Brown and Felix Salmon.

Axios Macro

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First look: Why White House economists are optimistic about cooler inflation

1 big thing: The inflation indicator tracked by the White House

SNAP expands (a tiny bit) with the debt ceiling deal

2. SNAP is going to expand (a tiny bit)

Illustration of a peach with a dollar-bill-shaped leaf

One of the last major labor market indicators before the Federal Reserve's upcoming policy meeting is out, and it points to a still-tight job market: Job openings in April edged up by 358,000 to 10.1 million. Quits and layoffs eased. 

In today's edition of Macro, a first look at new research from top economists at the White House that explains why inflation is so sticky. Plus, one surprising result from the debt ceiling deal.

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 672 words, a 2½-minute read.

A "skip" might be next for the Fed

1 big thing: A "skip" might be next for the Fed

Fed vice chair-designate Philip Jefferson pictured at a conference

Signals that the Fed will skip a rate hike

2. The skip signals 

Before we sent this newsletter yesterday, investors were largely still expecting the Fed might raise interest rates at its next meeting. That's shifted notably since then. More below. 

💼 Situational awareness: An employment report from payroll processor ADP said private payrolls rose by a stronger-than-expected 278,000 last month, while wage growth continued to moderate. 

Today's newsletter, edited by Kate Marino and copy edited by Katie Lewis, is 629 words, a 2½-minute read.

Spending, inflation point to still-hot U.S. economy

1 big thing: The still-hot economy

Animated illustration of a thermometer in the shape of a dollar bill sign, with temperature rising rapidly

2. Huge shift in expectations

Before you sign off for a long weekend, here's what you need to know about a slate of key economic data released this morning. Hint: It was hotter than expected, potentially complicating the path ahead for the Federal Reserve.

🗓 Programming note: We're off Monday for the Memorial Day holiday and back in your inbox Tuesday.

Today's newsletter, edited by Kate Marino and copy edited by Katie Lewis, is 486 words, a 2-minute read.

1 quick note: In yesterday's edition, we wrote that corporate profits continued to decline in the first quarter. That is true, according to a broad measure of corporate profits.

But according to a gauge that strips out the Federal Reserve, corporate profits continued to climb. More here ... h/t Bloomberg.

1 big thing: Why economists are watching rising pay

Illustration of an open briefcase with an upwards trending line popping out.  

2. Inflation's role in the debt limit deal

There's a Federal Reserve angle to the debt limit deal struck over the long weekend. More below.

But first, Axios Markets c0-author Emily Peck has a look at a buzzy new research paper about the labor market's role in inflation.

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 494 words, a 2-minute read.

National

The U.S. economy added 339,000 jobs in May, while the unemployment rate jumped to 3.7% from 3.4%, the Labor Department said Friday. 

Why it matters: Job gains came in well above forecasters' expectations — the latest sign that the economy is still underpinned by a hot labor market.

Economists expected a gain of 190,000 jobs last month. The May jobs figures are a pickup from the 294,000 added in April, which was revised up by 41,000. Job gains in March were revised up, too.

Details: Economic policymakers have kept a close eye on other details from the payrolls report — whether more Americans are joining the workforce and how quickly pay is rising.

The labor force participation rate — the share of workers with a job or hunting for one — held at 62.6% in May.

Meanwhile, average hourly earnings, a measure of pay, rose by 0.3% in May. Compared to the same period a year ago, wages are up 4.3%. 

What we're watching: The May jobs report is among the final data points Federal Reserve officials will consider before deciding whether to continue the interest rate hiking campaign that began more than a year ago.

Inflation remains too high, and there are concerns that rapid price gains are being fueled by the tight labor market and strong consumer demand.

Still, a top Fed official this week signaled the central bank may skip a rate hike at its meeting later this month. 

Editor's note: This is a developing story. Please check back for updates. 

Go deeper ... America's quit boom is over

U.S. economy adds 339,000 jobs as labor market stays hot

Economists expected a gain of 190,000 jobs last month.

Photo: Micah Green/Bloomberg via Getty Images

Jobs report

Jobs

Stock market

The U.S. economy added 339,000 jobs in May, while the unemployment rate jumped to 3.7% from 3.4%, the Labor Department <a class="gtmContentClick" data-vars-link-text="said" data-vars-click-url="https://www.bls.gov/news.release/empsit.nr0.htm" data-vars-content-id="095315e9-bb49-43a5-981d-552c72b88e1f" data-vars-headline="U.S. economy adds 339,000 jobs as labor market stays hot" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.bls.gov/news.release/empsit.nr0.htm" target="_blank">said</a> Friday. Why it matters: Job gains came in well above forecasters&#x27; expectations — the latest sign that the economy is still underpinned by a hot labor market.

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Data: U.S. Department of Labor; Chart: Axios Visuals

There is a quiet, defining feature of the hot labor market of the 2020s: a booming share of prime-age workers — those between 25 and 54 — who either have a job or are looking for one. 

Why it matters: That continued last month. The labor force participation rate among this cohort is at the highest level since January 2007, according to this morning’s jobs report.

Flashback: When the pandemic hit, there were forces (including fear of the illness itself) that kept more workers on the sidelines.

That left economic policymakers pessimistic that an inflow of workers would help heal labor shortages.

Where it stands: The opposite has been the case. Labor force participation among those most likely to want to work has fully recovered from pandemic lows.

It also hit a milestone it couldn't reach in the last decade: full recovery from its post-2008 financial crisis slump.

Of note: There are new highs among key demographics, including prime-age women. Their labor force participation rate hit an all-time high in May.

The bottom line: This is the chart to show anyone who says Americans don’t want to work anymore.

Prime-age workers hit labor market milestone

Prime-age worker participation (25-54) sees full recovery from post-2008 financial crisis slump.

Illustration of a crowd of workers marching towards a glowing briefcase. 

There is a quiet, defining feature of the hot labor market of the 2020s: a booming share of prime-age workers — those between 25 and 54 — who either have a job or are looking for one. Why it matters: That continued last month. The labor force participation rate among this cohort is at the highest level since January 2007, according to this morning’s jobs report.

The May jobs report hasn't even been released yet, but already Fed officials are signaling the central bank is willing to skip a rate hike later this month.

Why it matters: As a result, investors have now all but unwound bets of a hike at the June 13-14 policy meeting.

The big picture: The Fed has consistently stressed that it would rely on incoming economic data to determine the pace of rate hikes — an idea that appeared to put enormous weight on the inter-meeting data releases.

Last week's hotter-than-expected inflation report, therefore, caused markets to start pricing in a June hike.

Between the lines: Fed officials have put "so much weight on these data releases, which tend to be quite volatile and can be revised significantly," says Greg Daco, chief economist at EY-Parthenon.

"That means there can be significant swings in market pricing and market expectations. That could entail a potential rapid tightening of financial conditions that may not necessarily be what's desired by the Fed or optimal for the economy." 

What's new: Comments from a top Fed official ahead of the jobs report suggested that officials may hold off at the upcoming meeting — removing the pressure to read too much into Friday's jobs data and the upcoming Consumer Price Index.

What they're saying: "A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle," Philip Jefferson, a Fed governor who was nominated to step up to the second-in-command position at the central bank, said yesterday in a speech. 

"Indeed, skipping a rate hike at a coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming."

That followed comments from Philadelphia Fed president Patrick Harker, who said: "I am in a camp increasingly coming into this meeting of thinking that we really should skip, not pause." (Other regional Fed bank presidents, however, have been more hawkish.)

What's next: The May jobs report, out Friday at 8:30am ET, is expected to show a still-healthy but slower pace of jobs growth and more moderate wage growth compared to April. 

Investors have now all but unwound bets of a rate hike at the Fed's June 13-14 policy meeting.

Federal Reserve governor and vice chair nominee Philip Jefferson. Photo: Drew Angerer/Getty Images

Federal Reserve

The May jobs report hasn&#x27;t even been released yet, but already Fed officials are signaling the central bank is willing to skip a rate hike later this month.Why it matters: As a result, investors have now all but unwound bets of a hike at the June 13-14 policy meeting.

Is the American labor market white-hot or losing steam? The answer from the May jobs report released on Friday: yes.

Why it matters: The labor market is roaring, with employers once again adding way more payrolls than forecasters anticipated. Still, there are signs of softening trends that could suggest we're at a turning point.

By the numbers: The labor market added 339,000 jobs last month — the largest gain since January. Job gains in the previous two months were also stronger than initially thought, revised up by a combined 93,000. 

A separate survey of households, however, shows employment declining. The unemployment rate rose from 3.4% to 3.7% — a notable monthly jump.

Some of the historic job market gains for marginalized workers melted away: The Black unemployment rate, for instance, hit an all-time low in April but jumped by nearly a full percentage point to 5.6% last month. 

Of note: The household survey has a larger margin of error and is more volatile month-to-month. Economists tend to lean more on the survey of businesses, which is considered more reliable, especially after revisions. 

A big slump in the number of self-employed workers could explain why the household survey looks much weaker than that of establishments. 

What they're saying: "There are clear signs the labor market is still hot, though it's cooling," Daniel Zhao, lead economist at job-finding site Glassdoor, tells Axios.

"When you look under the hood of the report, permanent layoffs are rising." 

What's next: Top Fed officials have strongly hinted they were inclined to "skip" an interest rate hike at its upcoming policy meeting. The details of today's jobs report might not be strong enough to change their minds.

Headline jobs growth looks hot — a sign of still-strong demand on the part of employers. But that wasn't accompanied by accelerating wage growth, which is more likely to stoke inflation. 

Average hourly earnings rose 0.3% last month, slowing from the 0.4% pace in April. Notably, the share of prime-age workers employed or looking for work ticked up to 83.4% — the highest since January 2007. 

The May jobs report was strong, but underlying details point to a softening labor market.

Is the American labor market white-hot or losing steam? The answer from the <a class="gtmContentClick" data-vars-link-text="May jobs report" data-vars-click-url="https://www.axios.com/2023/06/02/may-jobs-report-employment" data-vars-item="in_content_link" href="https://www.axios.com/2023/06/02/may-jobs-report-employment" target="_self">May jobs report</a> released on Friday: yes.Why it matters: The labor market is roaring, with employers once again adding way more payrolls than forecasters anticipated. Still, there are signs of softening trends that could suggest we&#x27;re at a turning point.

Data: U.S. Labor Department; Chart: Axios Visuals

A phenomenon that defined the pandemic-era labor market is over: the Great Resignation — workers furiously quitting for new, likely higher paying jobs — is a thing of the past.

Why it matters: The historic surge of quitters was a symptom of an on-fire labor market, where demand for workers far outstripped supply of them. 

Now the job market may be entering a different era — one that more closely resembles pre-pandemic times.

By the numbers: The quits rate fell to 2.4% in April, according to the Job Openings and Labor Turnover Survey, released this morning. 

That is just a tick (0.1 percentage point) higher than the quits rate in February 2020 — and roughly in line with the average quits rate in 2019.

Even leisure and hospitality workers, once the poster child for the quits boom, are returning to pre-pandemic norms: the quits rate in this segment hit 4.6% in April — very close to the January 2020 rate of 4.4%, and well-below the peak 5.8% recorded last summer. 

What they’re saying: “We are pretty much back to a strong, robust labor market, but one that is no longer overheating,” says Julia Pollak, an economist at ZipRecruiter.

“One that isn't plagued by widespread labor shortages that are wreaking havoc across the economy, and causing firms to offer off-cycle wage increases and dispense of all hiring requirements. The deck isn't totally stacked in jobseekers‘ favor anymore.”

Flashback: At the height of the Great Resignation, the overall quits rate most recently peaked at 3% in April 2022, when there were roughly 4.5 million quits in a single month.

Turnover of that magnitude had never been seen before — at least not since the Labor Department started collecting the data in 2000. 

Workers were in such high demand that they felt confident enough to ditch current gigs for new (likely higher paying) ones. 

The bottom line: Americans who did job hop over the past few years have seen heftier pay gains. But that phenomenon, too, is fading — another sign of some heat coming off the labor market.

Job-changers saw annual pay grow more than 13% in April, according to payroll professor ADP — more than double the annual rate of job-stayers.

Still that was the slowest pace of growth since November 2021.

The Great Resignation is over, quit rates return to pre-pandemic levels

The quits rate fell to 2.4% in April, meaning the job market may be entering a different era — one that more closely resembles pre-pandemic times.

Labor economics

Illustration of an exit sign with a person's silhouette forming the "I". 

A phenomenon that defined the pandemic-era labor market is over: the Great Resignation — workers furiously quitting for new, likely higher paying jobs — is a thing of the past.Why it matters: The historic surge of quitters was a symptom of an on-fire labor market, where demand for workers far outstripped supply of them.

Courtenay Brown

Stories

Prime-age workers hit labor market milestone

America's job market stays solid in May, but there are cooling signs

U.S. economy adds 339,000 jobs as labor market stays hot

A "skip" might be next for the Fed

The Great Resignation is over, quit rates return to pre-pandemic levels

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👀 Indicator to watch

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