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PNC Chief Economist Gus Faucher: Another Solid Month of Job Gains in May,

Michigan Business Network
June 6, 2022 1:00 PM

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With Unemployment Rate Steady at 3.6%

  • Job growth was a solid 390,000 in May. 
  • The unemployment rate held steady at a low 3.6%, with a small increase in the labor force participation rate. 
  • Average hourly earnings rose a solid 0.3% in May. 
  • Job growth will continue in 2022, although the pace of gains will slow. Employment should return to its pre-pandemic level over the summer. 
  • There is little risk of recession in 2022, but the risks are higher for 2023 and 2024 as the Federal Reserve continues to raise interest rates to slow inflation.


Employment, as measured by a survey of firms by the Bureau of Labor Statistics, rose by a solid 390,000 in May from April. This is close to the recent pace; job growth over the past three months has averaged 408,000. Employment in April was revised slightly higher, to 436,000 from 428,000, while March job growth was revised down to 398,000, from 428,000. Private-sector employment rose by 333,000 in May, while government employment rose by 57,000. 

Employment in May was about 800,000, or 0.5%, below its pre-pandemic level. Employment fell by 22 million (14%) in March and April 2020. Given the depth of the downturn, the recovery in the labor market has been extraordinary. 

The unemployment rate was 3.6% for a third straight month in May. The unemployment rate soared from 3.5% in February 2020 to 14.7% in April 2020 with the pandemic, and then steadily fell through the rest of 2020 and all of 2021. It is now just barely above its pre-pandemic level but has been flat for three straight months. 

Employment as measured in a survey of households, different from the survey of employers, rose by 321,000 in May. The labor force increased by 330,000 over the month, while the labor force participation rate—the share of adults working or looking for work—ticked up by 0.1 percentage point to 62.3%. The labor force participation rate has been between  62.2% and 62.4% throughout 2022, well below the 63%+ rate before the pandemic. The labor force participation rate is unlikely to return to its pre-pandemic level, and the labor market is structurally tighter now than it was before the pandemic. 

Job growth was generally solid across industries. Employment rose by 59,000 in goods-producing industries in May, with gains of 36,000 in construction and 18,000 in manufacturing. Private services-providing industries added 274,000 jobs over the month, with increases of 75,000 in business/professional services and 74,000 in education/health services. Leisure/hospitality services added 84,000 jobs in May as the industry continues to recover from the pandemic and consumers dine out and travel more. Still, employment in leisure/hospitality services is still down by about 1.3 million (8%) compared to before the pandemic. There was a big decline in retail trade employment of 61,000 in May, however. 

Average hourly earnings rose a solid 0.3% over the month. Average hourly earnings were up 5.2% in May from a year earlier, although this is a slowing from 5.6% in March and 5.5% in April. The tight labor market is forcing employers to raise wages, but the pace of wage gains has slowed in the spring. 

The average workweek held steady at 34.6%. With more jobs, a solid increase in wages, and no change in the average workweek, total earnings rose by a solid 0.6% in May, although this likely lagged behind the pace of inflation given the surge in gasoline prices over the month. 

The May jobs report was another solid one. Job growth is slowing in 2022: it has averaged around 410,000 over the past three months, compared to almost 550,000 per month for all of 2021. But the slowing in job growth is coming from a lack of labor supply, as demand for workers remains very strong, and job growth remains above the long-term trend. Employment should be back at its pre-pandemic level in the next few months. Job growth is expected to gradually slow over the rest of 2022 and in 2023 as the Federal Reserve increases interest rates in an effort to slow economic growth and push inflation lower. 

Given the very strong labor market, there is very little risk of recession in 2022. Businesses are adding jobs and consumers are increasing their spending. But recession risks will rise in 2023 and 2024 as the cumulative impact of higher interest rates and high inflation hit the economy. The risk of recession over the next couple of years is around 40%, about double what it was prior to the Russian invasion of Ukraine.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

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Michigan Business Network is an online broadcasting company that provides knowledge, news, and insights into Michigan’s businesses, industries, and economy.