Job growth improved considerably in May as the unemployment rate matched a near-50 year low. Trucking hires also made significant strides during the month, erasing the large decline in trucking employment from last month.
The Bureau of Labor Statistics reported that the economy added 223,000 workers during the month, up from a downwardly-revised gain of 159,000 in March. This beats consensus estimates of 190,000 and signals that demand for labor remains robust in the 2nd quarter of the year. Employment growth in May was supported by large gains in the service sector, led by strong hiring of health care, retail, and professional service workers. Construction and manufacturing job growth was also solid, with 25,000 and 18,000 workers added to payrolls, respectively.
In addition, the jobless rate in the economy fell for the second consecutive month to 3.8% in May. This ties December of 2000 for the lowest unemployment rate in the economy since 1969. While last month’s decline was driven by a fall in the size of the labor force, this month’s improvement was driven by stronger hiring in the economy.
Rounding out this morning’s positive report, wage growth also exceeded expectations in, rising 0.3% from April’s levels. Hourly earnings are now 2.7% higher than at this point last year, and look to accelerate further as labor market conditions continue to tighten.
Trends in freight hiring
Trucking hires also improved quite a bit in May, as truck transportation employment rose by 6,600 during the month. This reverses last month’s 6,400 decline and marks the eighth monthly increase in the past nine months. The trucking industry has now added a net of nearly 25,000 jobs since the start of the 3rd quarter last year, as increased demand for freight throughout the economy has led carriers to step up efforts for find and retain drivers.
While there has certainly been a break in the trend of hiring after a couple of years of stagnant job growth, the industry still finds itself faced with significant capacity issues. Even with the impressive improvement over the past several months, trucking employment is still only 1.7% higher than it was a year ago. This is roughly in line with the pace of employment growth in the overall economy, and faster job growth will be necessary to alleviate some of the pressure from the capacity crunch.
Behind the numbers
The jobs report this morning carried the rare trifecta of positive news, with job growth, unemployment, and wages all beating expectations in May. The unemployment rate continues to drift down further below estimates of the “natural” rate of unemployment, which is just another sign of how tight the labor market has become. It is no coincidence that reports on labor shortages are popping up all across the economy.
Given this market tightness and the difficulty in finding qualified workers, wage growth has been generally very sluggish, even with the good results this morning. Earnings growth has hovered around 2.5% for the better part of two years now, signaling that businesses are resorting to other types of benefits or bonuses to try and attract employees. Many businesses learned during the last recession how hard it is to adjust wages down when times are bad, so they may be especially reluctant to raise wages now that things are looking good.
Ibrahiim Bayaan is FreightWaves’ Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing.