On the May Jobs Report: What Labor Shortage?

A beat for payrolls, even on top of small positive revisions. It’s a little strong compared to other contemporaneous labor market data, but it’s about time we had an anomalously good month after so many anomalously bad ones. The usual sluggish earnings growth shouldn’t change the Fed’s outlook. The new low for the unemployment rate does not imply a critical labor shortage. Data shows shortages in some industries and regions, surpluses in others. The open rate is still below the highs seen in most expansions, and the “Beveridge Curve” shows unemployment still falling linearly with the rising open rate – looking more “mid-cycle” than “end-of-life.” We calculate the economy today is still 1.4 million jobs from maximum employment.