Jobs data to show whether worker shortages still slow hiring

WASHINGTON — With U.S. businesses scrambling to fill millions of jobs as the economy reopens much faster than many had expected, Friday’s jobs report for May will help show whether their efforts are succeeding.

The fading of the pandemic has released substantial pent-up demand among consumers to eat out, travel, shop, attend public events and visit with friends and relatives. But it has also produced a disconnect between companies and the unemployed. Businesses are rushing to add workers immediately. Yet many of the unemployed are either seeking better jobs than they had before the pandemic, still lack affordable child care, worry about contracting COVID-19 or have decided to retire early.

That disconnect resulted in a sharp slowdown in hiring in April, when employers added far fewer jobs than economists had forecast and many fewer than had been hired in March.

Analysts have predicted an improvement for May, with 650,000 jobs added, compared with April’s surprisingly tepid gain of 266,000. The unemployment rate is projected to fall from 6.1% to 5.9%, according to data provider FactSet. If the forecasts for May are accurate, that would still be a slower hiring pace than the 1 million jobs a month that many economists had envisioned in early spring. The economy still has 8.2 million fewer jobs than it did before the pandemic struck.

Either way, the economy is recovering at a healthy pace, and companies are still seeking workers: Job postings in late May were nearly 26% above pre-pandemic levels, according to the employment website Indeed. Government data shows that posted jobs have reached their highest level on record dating back to 2000.

And consumers are opening their wallets. In April, they increased their spending after a huge gain in March that had been fueled by the distribution of $1,400 stimulus checks. With more Americans feeling comfortable about staying in hotels and visiting entertainment venues, spending on services jumped.

Service industries, including banking, retail, and shipping, expanded at the fastest pace on record in May. The evidence suggests that consumers have embarked on a long-anticipated shift away from the large goods purchases that many of them had made while hunkered down at home to spending on services, from haircuts to sporting events to vacation trips.

The speed and strength of the overall economy’s recovery from the pandemic recession, boosted by federal rescue aid and rising vaccinations, have surprised just about everyone. The economy expanded last quarter at a robust 6.4% annual rate, and economists envision growth in the current quarter reaching a sizzling annual pace of 9% or more. All that growth has raised inflation fears. But for now, it has propelled demand for workers.

The number of people seeking unemployment aid has fallen for five straight weeks to its lowest level since the pandemic began, a sign that layoffs are dwindling. There are still 15 million people receiving either federal or state jobless aid, though that number has also declined from roughly 20 million in February.

Many businesses blame a $300-a-week federal unemployment benefit for discouraging some of the jobless from taking work. Republican governors in 25 states have responded by cutting off that benefit prematurely, starting this month, before the benefits are scheduled to end nationally on Sept. 6.

Jed Kolko, chief economist at Indeed, found that the announcements of federal benefits being cut off sparked an increase in job-search activity in those states, such as clicking on job ads, though that increase faded after several days.

Becky Frankiewicz, president of the temporary staffing firm Manpower Group’s North American division, said many of the firm’s clients are raising pay and benefits to try to attract more applicants. Some of these companies, particularly in manufacturing and warehousing, are also trying other tactics, like paying their workers weekly or even daily, rather than every two weeks. Manpower is also encouraging its clients to make job offers the same day as an interview rather than waiting.

About 60% of Manpower’s temporary placements are leaving their jobs before a temporary assignment ends, Frankiewicz said, mostly because they are receiving better offers.

“People have options,” she said. “Companies have to offer speed in cash, speed to hire and a lot of flexibility in how they work.”

For now, though, there are signs that many of the unemployed remain cautious about seeking jobs.

On Thursday, Tony Sarsam, CEO of SpartanNash, a grocery distributor and retailer, said on a conference call with investors that the company took part last month in a job fair with 60 companies that had 500 jobs to fill.

“Only four candidates showed up,” Sarsam said.

———

AP Retail Writer Anne D’Innocenzio contributed to this report from New York.