Almost all construction jobs lost were in Specialty Trades.

By Manuel Gutierrez, Consulting Economist to NKBA

The numbers are better, but not great.

The month of May saw the creation of 559,000 jobs, a respectable number but still short of expectations. May results were double those of April, when just 278,000 jobs were created. Yet that was far below the 785,000 created in March, when the outlook looked quite rosy. And the down side is that the construction sector has lost jobs in three of the last five months, including 20,000 in May.

Job creation must seriously ramp up if there’s any hope of returning to pre-pandemic levels, when total U.S. employment stood at 152.2 million. At May’s pace, it would take over a year to reach that earlier apex. Given the significant government cash infusions, accommodating policies from the Fed, and the strong demand that businesses are witnessing for their products, the expectation would be for a greater number of jobs added every month.

There are currently over 9 million people unemployed and looking for a job. At the same time, there are more than 8 million job openings — businesses that desperately need workers. The two are not in concert with each other, based on disparities in skill levels and disinterest by some of the jobless about availabilities within their markets.

At the current pace of job creation, it would take over a year to return to pre-pandemic employment levels.

The unemployment rate improved in May, down by 0.3%  to 5.8% — the lowest level since March 2020, as April 2020 saw the rate explode by over 10 points to 14.8%.

The numbers at the bottom of the bars in the right panel of Figure 2 show unemployment rates a year ago by age group. Compared with current levels, it shows that the rate has been cut by at least half for all age groups, although there is still room to get back to pre-pandemic rates.

The improvement in the unemployment rate, however, is partly due to fewer people participating in the labor force. That rate — measuring the ratio of people who are either working or actively seeking a job to the total population — was down in May to 61.6%, 0.1% lower than in April. The overall rate though, is almost two percentage points below what it was in January 2020.

Labor participation for all age groups is lower than a year ago by at least one percentage point. The expectation from the current economy is that people would be more actively involved in the labor force, but that isn’t the case.

Employment among all age groups is still lower than it was in January 2020, except for those under age 20. Employment for 16-19 year-olds today is nearly 5% higher than it was in January 2020.

May’s job growth was concentrated in the two sectors hardest hit by the pandemic — Hospitality and Entertainment — which together accounted for more than half of the jobs added for the month (Figure 3.)

Hospitality, which includes hotels, bars and restaurants, added 221,000  jobs in May. For the first five months of this year, this sector has seen employment grow by nearly a million jobs, but it is still almost two million short of its January 2020 level, when Hospitality employed 14.4 million people.

Entertainment generated an additional 72,000 jobs in May, but is still short of last year’s employment total by half a million jobs.

In contrast to most industries that posted gains in May, as noted above, Construction lost 20,000 jobs — following a 5,000 job reduction in April.

The 20,000 jobs lost in May are mostly due to a 19,300 decline in Specialty Trades (Figure 4.) The other three construction sectors in Figure 4 show an increase for the month. Note that the Buildings Construction chart is the sum of both Residential and Nonresidential, and is included for illustration purposes.

Employment in construction is still 225,000 short of last year’s levels. Most of the gap is concentrated in Specialty Trades, which represent over 63% of total employment in construction. Still, nonresidential construction also contributed to the gap, with a decline of 39,000.

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