WASHINGTON—May’s unemployment report moved in the right direction with 559,000 jobs added after an abysmal April report. Rachel Greszler, a research fellow in Heritage’s Grover M. Hermann Center for the Federal Budget, released the following statement Friday on the way forward:
“Following a hugely disappointing April jobs report, employment increased by 559,000 jobs in May as the unemployment rate declined to 5.8%, from 6.1% in April. This is the right direction for the recovery, but it’s nowhere near where employment should be given strong demand for goods and services and a record-high number of job openings.
“Never before in recorded history has demand for workers been so high alongside high unemployment. The last time that the unemployment rate was at 5.8% in 2014, there were 3.4 million fewer job openings than there are now (4.7 million vs. the most recently reported 8.1 million). Moreover, labor force participation remained stuck at 1.6 percentage points below the pre-pandemic level, at 61.6%—showing many have left the labor force entirely. The employment-to-population ratio is just 58%, down 3.1 percentage points from pre-shutdowns.
“While some have blamed low labor force participation on fear of contracting COVID-19 and on child care struggles, the vaccine is now widely available with 63% of adults receiving at least one dose, and a report by former Obama Council of Economic Advisors Chairman Jason Furman found that child care challenges account for 'zero' of the pandemic-related decline in employment.
“As small businesses across the country struggle to fill vacant positions, they need to keep pace with demand. Ongoing federal unemployment insurance bonuses are hurting, instead of helping the recovery. Americans have seen the 'help wanted' and 'we’re hiring' signs—even some businesses posting apologies for delays due to a shortage of workers. Businesses have had to raise compensation to compete with federal unemployment insurance benefits, resulting in higher prices for consumers.
“It’s time for the federal government to stop pumping more deficit-financed spending into the economy, simultaneously stimulating demand and restricting supply. Businesses already face high costs from government taxes and regulations—they don’t also need the government competing with them.”
Greszler highlighted the 25 governors who have responded to pleas for help from the countless struggling businesses amid worker shortages by announcing they will end the federal $300 bonus unemployment benefits prior to the current September 2021 expiration. This should lead to more significant job gains and a stronger recovery in those states over the next few months.