US may have seen massive rehiring in May despite labor troubles

WASHINGTON: The key US government jobs report Friday is expected to show American businesses added hundreds of thousands of jobs last month as vaccines helped the economy return to normal -- but with Covid-19 still keeping some people away from the workplace, strong rehiring is no sure thing.

Economists expect the Labor Department data will show the world's largest economy added 720,000 jobs and the unemployment rate ticked down to 5.9 percent in May, a consensus supported by positive data released this week.

Payroll services firm ADP boosted the upbeat sentiment when it said private employers added a huge 978,000 jobs last month, while the Institute for Supply Management (ISM) reported its index gauging the health of the service sector, a key employer, hit an all-time high in May.

In addition, weekly data from the Labor Department showed new unemployment aid applications dropped below 400,000 last week for the first time since the pandemic sent them soaring into the millions in March 2020.

"It is all coming together, as the pandemic fades and businesses reopen, and workers are starting to see the benefits," economist Joel Naroff said.

However, continued fears of the virus, the availability of generous government unemployment benefits in some states and workers' continued difficulties accessing childcare, public transportation and education have created labor shortages.

Ian Shepherdson of Pantheon Macroeconomics predicted jobs gains of only 550,000, saying the hesitation of some people to rejoin the labor force undermines both ADP's model and the usual trends associated with falling jobless claims.

"Payrolls tend to rise more quickly when claims are falling fast, but the relationship between firing and hirings is weaker now because of the large number of people choosing not to participate in the labor force," he said in an analysis.