May Jobs Report: Job Market Shrugs Off Slowdown Fears


June 3, 2022

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.

The job market logged healthy gains in May, shrugging off fears of a slowdown and solidly beating expectations. Employers added 390,000 jobs in May, modestly slower than the 436,000 jobs added in April. The unemployment rate held at 3.6 percent for the third month in a row, holding just above the pre-pandemic rate. Despite concerns of a slowdown, this doesn’t look like a labor market about to tip into recession.

Jobs Growth Beats Expectations

Payroll employment rose 390,000 in May, only barely slower than April’s job gains. Overall, payroll employment is now just 822,000 jobs short of pre-pandemic levels. The slowdown in jobs growth pushes back the time when we may expect to return to pre-pandemic levels, but continued jobs growth at this level would push us to reach that milestone by the fall.

The industries with the largest job gains were leisure & hospitality (+84,000 jobs), professional & business services (+75,000) and transportation & warehousing (+47,000). Several industries saw job losses, most notably in retail trade (-60,700 jobs). The decline in retail jobs aligns with the weakness reported in retailers’ earnings calls, but overall, consumer spending seems to be strong enough to sustain good hiring numbers in leisure & hospitality as spending rotates from goods to services.

Unemployment Flat at 3.6 Percent

The unemployment rate held at 3.6 percent, the third month at this level, just above the pre-pandemic unemployment rate. The labor force participation rate improved modestly to 62.3 percent. While the unemployment rate didn’t improve, the underlying data was healthy showing a rise in labor force participation and a negligible change in unemployment levels.

Wage Growth Slows

Average hourly earnings grew 5.2 percent year-over-year in May, slowing from 5.5 percent in April. While the slowdown may not be welcome news to workers, it is a signal that inflation may moderate as monetary policy continues to tighten. Accelerating wage growth would raise concerns of a wage-price spiral. But for American households waiting for tightening monetary policy to kick in, there is likely to be some bitter medicine to swallow as price inflation outstrips wage growth

What’s Coming Next

This does not look like a labor market about to tip into recession. Job gains were healthier than expected and the labor force participation rate ticked up. April’s JOLTS report showed near record high labor demand and record low layoffs. Despite concerns about a slowdown and even a recession, the labor market’s fundamentals look healthy.

More Insights

The job market shrugged off fears of a downturn in May, adding 390,000 jobs. That’s better than expectations and while this is the slowest pace since April 2021, it’s still a solid gain.

Payroll employment is now within striking distance of pre-pandemic levels (-822,000). If jobs growth continues at the pace we’ve seen so far in 2022, we should return to pre-pandemic levels by the fall.

Job gains were healthy in most industries, with the notable exception of retail where payrolls fell 60,700 with the largest drop in general merchandise stores (-32,700 jobs). This aligns with weak earnings calls from retailers like Walmart reporting an unanticipated shift in consumer spending from goods to services.

Despite prominent reports of layoffs & hiring freezes in tech, there’s no sign of a tech downturn in May. Information added 16,000 jobs and professional & technical services added 48,200 jobs. Data from the Indeed Hiring Lab also shows that tech job postings are still strong.

Line graph titled “Software development job postings well above economy average.” With a vertical axis ranging from 0% to 100%, Indeed tracked with two lines, the percent change in overall job postings and software development job postings between February 1, 2020 and May 27, 2022. On May 27, 2022, software development job postings were 121.2% above February 1, 2020, the pre-pandemic baseline.

Average hourly earnings grew 5.2 percent year-over-year in May, decelerating from 5.5 percent in April. Wage growth is elevated but slowing even before tighter monetary policy kicks in, mitigating fears of a wage-price spiral.

By industry, there are clearer signs of cooling wage growth. For production & nonsupervisory workers in leisure & hospitality, annual wage growth peaked at 16.6 percent in December 2021 but that growth has slowed every month since then.

The unemployment rate was flat at 3.6 percent in May for the 3rd month in a row, tantalizingly close to hitting its pre-pandemic level. But the labor force participation rose to 62.3 percent, a healthy sign despite the unchanging unemployment rate.

One crucial caveat: the unemployment rate was flat overall in May, but ticked up for both Black and Hispanic/Latino workers. A hot job market is when these gaps ordinarily close so we’d like to see further progress if there is a potential slowdown on the horizon.

On the bright side, the rise in unemployment for Black workers in May was accompanied by a jump in the Black labor force participation to 63.0 percent, the highest level we’ve seen during the pandemic. The Black labor force participation rate now exceeds the white labor force participation rate by the largest margin on record.

To speak with Daniel Zhao about this report, please contact pr@glassdoor.com. For the latest economics and labor market updates follow @DanielBZhao on Twitter, connect on LinkedIn, and subscribe to Glassdoor Economic Research.