The numbers: The U.S. added a modest 559,000 new jobs in May even though most companies are eager to hire, signaling that widespread labor shortages are holding back an economic recovery.
The increase in employment in May fell short of Wall Street expectations. Economists surveyed by Dow Jones and The Wall Street Journal had forecast 671,000 new jobs.
In premarket trades, stocks were set to open higher.
The unemployment rate, meanwhile, slipped in May to a pandemic low of 5.8% from 6.1%. Yet the official rate almost certainly understates the true level of unemployment by 2 to 3 percentage points, economists say.
Big picture: The economy is strong and getting stronger thanks to a disappearing coronavirus pandemic, massive federal stimulus cash and a torrent of pentup demand. Americans are rushing to do all the things they couldn’t do during the pandemic.
The biggest obstacles to a full recovery are major shortages of key supplies and labor owing to ongoing pandemic-related disruptions.
Take supplies. Companies slashed production early in the crisis because of depressed demand and difficulties obtaining critical materials from overseas suppliers.
They’re trying to catch up now, but they were caught off-guard by the quick rebound in the economy and a sudden surge in demand. Lingering trade disruptions have added to their problems.
An emerging labor shortage is an even bigger surprise. The unemployment rate still quite high and the U.S. is missing some 8 million jobs that existed before the pandemic.
Economists say early retirements, a lack of child-care options, lingering fear of the virus and generous unemployment benefits explain why more people haven’t returned to work. These problems probably won’t clear up at least until the fall.