Overview: The economic data released over the past week provided further confirmation that the labor market is tightening and that many companies are having trouble hiring enough workers. The reports were roughly in line with the expected levels, however, and mortgage rates ended the week with little change.
In May, the economy gained 559,000 jobs, a little below the consensus forecast of 650,000. Strong increases were seen in the leisure and hospitality sectors, which were hurt greatly by the pandemic. The unemployment rate fell to 5.8%, slightly below the consensus of 5.9%. Average hourly earnings, an indicator of wage growth, were 2% higher than a year ago.
The latest Job Openings and Labor Turnover Survey (JOLTS) report revealed that there were 9.3 million job openings in April, far above the consensus forecast of 8.2 million, and a record high. Federal Reserve officials and investors value this data to help round out their views on the tightness of the labor market. An increase in job openings is viewed as a sign of strength in the labor market, since it indicates that companies are interested in hiring, but the pool of available workers is not adequate to fill them quickly enough.
Another significant economic report released this week remained at very high levels, as expected. The Institute for Supply Management (ISM) Services Index increased to 64, a record high, and levels above 50 indicate that the sector is expanding. Reinforcing a common theme, a large number of service companies reported difficulties in hiring enough workers to keep up with growing demand. Fed officials and investors will be watching closely to see how quickly wages rise as companies compete to attract skilled employees.
Week Ahead
June 10 — European Central Bank meeting
June 10 — Consumer Price Index (CPI)
June 15 — Retail Sales report
June 16 — U.S. Federal Reserve meeting