Breaking Down the Jobs Report — May 2021

Beyond the headline numbers.

The May jobs report wasn’t quite as disastrous as April’s, but it wasn’t a return to the happy-happy-fun-time envisioned by the Biden administration earlier this spring.

Here are the top level numbers.

• 559,000 jobs added
• 5.8% unemployement rate, down from 6.1% in April

That may seem like good news, but it’s not. By a long shot.

Let’s put these numbers in context by comparing them to the jobs situation during the financial crisis of 2008/2009.

Great Recession

• 8.4 millions jobs lost in 21 months (2/09–10/09)
• “Barbecue” recovery (i.e. low and slow), with job gains ranging between 100,000 and 300,000 per month through 2019

Pandemic Recession

• 22.4 millions jobs lost in 2 months (3/20–4/20)
• “Incomplete” recovery (i.e. permanent job losses), with only 11,000,000 jobs gained back in 4 months (5/20–8/20)
• Still 8 million fewer employed compared to pre-pandemic.

The pandemic recession was a much deeper hit to the economy than the Great Recession, and we are still nowhere near a full recovery. So what’s going on?

Job Openings

The latest JOLTS report (Job Openings and Labor Turnover Survey) shows 8.1 million job openings as of the last business day in March 2021.

That would seem to match up nicely with the employment gap of 8 million, but business cannot find people to fill their jobs.

As it turns out, people aren’t ready to go back to work for a number of reasons.

• Lingering fear of COVID-19
• Lack of decent, affordable child care (this hit women especially hard)
• Looking for a better job (particularly restaurant workers)
• Taking early retirement

The additional federal unemployment benefits only make, “a small but likely noticeable contribution to job-finding rates and employers’ perceptions of worker availability.”

Wages

Income has started increasing a bit the past 12 months, but not by much.

• 0.5% month-over-month
• 2.6% year-over-year

Additionally, when inflation is coming in a 4.2%, workers are actually losing income.

Without getting too deep into the inflation discussion, this summer is going to sting when it comes to the cost of everyday items.

The Fed and the White House both say this is a transitory problem, as people are “flush with cash” from the $1,400 stimulus checks, but I can’t see how that little amount of money can cause a spike in prices this big.

And that’s assuming the $1,400 wasn’t already spent on necessities, which was the whole rationale behind the stimulus checks in the first place.

Participation Rate

For the long-term outlook, this is the big one.

This number shows the number of currently employed people compared to the total population.

Why is this important? Because it shows how many adults can support both the underage and elderly populations.

In other words, how many income earners does the country have to raise the next workforce while taking care of the prior workforce in retirement?

The participation rate peaked in the 1990’s to about 67% but has been on a downward trajectory since the dot-com crash, currently standing at 61.6%.

If this doesn’t go up, the workforce will be overburdened taking care of two outsized generations.

The Takeaway

Always remember, the stock market is not the economy.

And the national economy is not always your economy.

While I may have painted a picture of doom and gloom just now, don’t get too down in the dumps if your personal financial situation isn’t quite up to snuff.

Just as all politics is local, so is economics.

The big picture data just gives you a backdrop of the overall environment you’ll be working in.

If you were able to keep your job through the pandemic, now is the time to shine. Business are on the hunt for top talent, and this may be just the right moment to get that promotion or make a career change.

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This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.