The job market gets even hotter with the unemployment rate near a pre-pandemic low

June 3rd, 2022

A help wanted sign is posted at the front entrance to a restaurant, in Providence, R.I., Thursday, June 2, 2022. (AP Photo/Steven Senne)

The U.S. job market got even tighter last month as employers struggled to find people to wait tables, staff factories and guard swimming pools.

The Labor Department said Friday that U.S. businesses added 390,000 jobs in May, as the unemployment rate held steady at 3.6%. Job gains for March and April were revised down by a total of 22,000 jobs.

The Holiday World & Splashin’ Safari theme parks in Santa Claus, Ind., typically hire about 2,200 seasonal workers for the summer, but so far this year the parks are about 30% short of that total.

“We’re not panicking,” said Matt Eckert, the parks’ president and CEO. He added that year-round staffers help fill the gaps. “I’ve made my share of pizzas. I’ve powdered my share of funnel cakes. We jump in and do whatever we’ve got to do to make sure that we get the job done.”

Lifeguards and ride operators are particularly scarce this year, so the parks are offering a $1,000 bonus for those positions.

With the school year ending, Eckert hopes to see more students and teachers applying for summer positions. For teenagers, this could be the best job market in over a decade.

The demand for labor also has some employers hoping that older workers who left the workforce earlier in the pandemic will come out of retirement, especially after the recent drop in the stock market put a dent in their 401(k)s.

Tim Fiore, who surveys manufacturing managers each month for the Institute for Supply Management, says factories had somewhat more success filling jobs in May than the month before. But they’re still struggling with heavy turnover.

Factories added 18,000 jobs in May.

“There is some improvement but it’s a long way to go,” Fiore says. “And I think on the employment side here, it’s going to be a slow slog because there just isn’t that much labor out there.”

The hot labor market comes at a time of hot inflation

In order to attract scarce workers, employers have been offering more flexible schedules, better benefits and higher wages. Average hourly wages in May were 5.2% higher than a year ago — a slight moderation from the month before.

But even those fatter paychecks aren’t keeping pace with rising prices.

And the Federal Reserve is concerned that rising wages could fuel stubbornly high inflation. At 8.3% in May, inflation is already near a four-decade high.

The central bank has begun raising interest rates aggressively in an effort to regain control over prices. The Fed raised rates by half a percentage point in early May. Two more, similar-sized rate hikes are expected in June and July.

Former Treasury Secretary Larry Summers is skeptical the Fed can curb inflation without triggering a recession and the higher unemployment that comes with it.

“I don’t think there’s a durable reduction in inflation without a meaningful reduction in wage growth,” Summers said this week during an online interview with the The Washington Post. “And right now with the labor market so tight, I don’t see such a meaningful reduction in wage growth taking place.”

The construction industry is typically one of the first to feel the effects of rising interest rates, but that wasn’t evident in the May hiring report. Construction companies added 36,000 jobs last month.

Freddie Mac says the average rate on a 30-year fixed mortgage this week was 5.09% — down slightly from last week but more than 2 percentage points higher than this time last year.