Economy added 272,000 jobs in May, soaring past expectations

Previous elevated levels of job openings had led to high rates of people quitting jobs and worker shortages, giving employees more leverage in the job market during pandemic recovery. However, those labor shortages sparked concern among policymakers at the Federal Reserve hoping to tame surging inflation at the time.

Most signs point to a job market in a healthy spot. Layoffs remain near historic lows as employers are cautious to let people go; workers are staying in their place, rather than switching jobs at the elevated rate of the pandemic’s end when employers had to compete fiercely to keep up with demand.

“You have to zoom out and look at the overall picture,” said Julia Pollak, chief economist at ZipRecruiter. “This is a new normal — a less dynamic and more stay-in-place labor market where companies aren’t firing people quite as much and people aren’t switching jobs quite as much. As a result, companies aren’t having to hire quite as much either.”

Economists say employers facing elevated interest rates that have made borrowing more expensive have been expecting rate cuts later this year, which can spur economic growth. And recent job data gives central bank policymakers some evidence that the economy is approaching a “soft landing,” meaning it is neither running to hot inflation nor veering toward a recession.

One reason that the labor market has grown steadily over the past year, boosting the overall economy as job openings fell, is due to a major pickup in immigration that helped close long-standing labor shortages. More than 3 million immigrants arrived to the United States in 2023, according to data from the Congressional Budget Office.

President Biden’s new plan announced this week to shut off access to the U.S. asylum system when illegal border crossings surpass a daily threshold could change labor market dynamics.

“Immigration has played very important role in bolstering our economy,” said Joe Brusuelas, chief economist for the accounting firm RSM US. “If we do see a curtailment of immigration, then I would expect that would create a tighter labor market. That would likely send the unemployment rate down and cause wages to rise.”