The economy added a very robust 339,000 jobs in May, smashing economists’ expectations of around 190,000. Job gains have beat expectations 14 of 17 months going back to January 2022.
The 339,000 jobs added by employers in May signal that businesses remain confident in adding new positions in addition to backfilling open roles. May’s job gains bring the 2023 total to 1.6 million through the first five months of the year, exceeding the annual total projected by many economists.
Job gains have certainly begun to normalize, but May’s total is still above the pre-pandemic average of 200,000 jobs added per month. December 2020 is the last time monthly job gains were below 200,000.
Job gains for both March and April were revised upward by a total of 93,000, and the labor market remains incredibly tight.
Demand for Workers Remains Strong
Despite job gains returning to a pre-pandemic level, the labor market is among the tightest in history, and the shortage of talent continues to prove challenging for many businesses.
Job openings are a key indicator of labor demand. And April’s job openings, reported earlier this week, showed signs that companies have not really let up in terms of hiring plans.
Job openings increased to 10.1 million. While job gains have moderated from last year’s average of just over 11 million per month, they remain much higher than the 2015 to 2019 average of 6.4 million monthly job openings.
As demand for workers starts to moderate, we’d expect record wage growth to ease, but May’s jobs report shows 12-month wage growth edged down slightly to 4.3%. LaborIQ is projecting wage growth to ease considerably throughout the year, ending 2023 at 3.5%.
Layoffs Increase as Unemployment Ticks Up Slightly
Hiring is still quite robust, and layoffs have not increased at the pace many projected. Layoffs actually decreased in April by over 260,000 to 1.6 million, below the 1.9 million monthly average layoffs before the pandemic.
And the unemployment rate ticked up to 3.7%, just above pre-pandemic lows. With 10.1 million job openings, and just over 6 million unemployed workers available to fill those open roles, there are 1.7 open jobs for each unemployed worker.
Our prediction for 2023 is that the labor market will continue moderating to historic norms. And slower job growth over the past two months could be a sign that the labor market is finally starting to cool.
Companies will need to watch the labor market and track compensation trends closely this year to stay competitive.