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Larry Edelman

Worker shortage? Maybe not. Businesses went on a hiring binge in May

The biggest gain in nearly a year is a sign that whatever difficulties employers were having finding workers may be easing

Businesses added 978,000 jobs in May.AFP via Getty Images

The litany of economic anxieties is long: Are consumer prices and wages inflating too quickly? Will the Federal Reserve raise interest rates sooner than expected? Did the pandemic so deplete the labor force that there aren’t enough workers to fill all the open jobs?

It will take months for the outlook to get clearer — an eternity in a world that demands instant answers to even the most complex questions. In the meantime, breathe deeply and relax. Things are moving in the right direction.

Consider this news on Thursday: Businesses responded to the widening elimination of coronavirus restrictions with a hiring binge in May, adding a whopping 978,000 jobs, according to the ADP Research Institute’s monthly analysis of private-sector payroll data. It was the biggest gain in nearly a year and a sign that the struggle by some employers to find enough workers may be easing.

Separately, the US Department of Labor said Thursday that first-time claims for unemployment, a proxy for layoffs, fell last week to the lowest level since the start of the coronavirus crisis in March of last year.


The ADP data for May were “unambiguously strong,” said Mark Zandi, chief economist at Moody’s Analytics, which crunches the numbers for ADP.

He expects Friday’s employment report from the Labor Department to be robust, with an increase of 750,000 jobs in May and the unemployment rate falling to 5.9 percent from 6.1 percent in the previous month.

Now, ADP’s payroll tally can diverge widely from the monthly data produced by the Labor Department’s Bureau of Labor Statistics, which is derived from its own survey of employers. That was the case for April, when ADP said businesses created a revised 654,000 jobs, while BLS pegged private-sector job growth at just one-third of that.


But even after Zandi’s jobs forecast fell far short of the government’s April total — most economists whiffed badly — he’s optimistic economic growth will surge into next year, even if there are ups and downs along the way. After the massive worker dislocations caused by pandemic shutdowns, the labor market can’t pick up right where it left off in February 2020.

“If BLS comes in meaningfully weaker, I suspect it would be due to timing and other measurement issues, and the numbers in coming months will be much stronger,” Zandi said.

According to ADP, the leisure and hospitality sector led the gains among private employers in May, adding 440,000 positions.

The increase is noteworthy because much of the anecdotal evidence of employers struggling to staff up has come from restaurants, hotels, and other consumer-facing businesses that were forced to shut down during the pandemic. Hiring was spread fairly evenly among small, midsize, and large companies.

Regular state jobless claims fell to a seasonally adjusted 385,000 for the week ended May 29 from 405,000 a week earlier, Thursday’s data from the Labor Department show. Federal pandemic claims dropped 19 percent to 76,000.

However, new applications for state benefits over the past month still ran at twice the rate seen before the pandemic, and more than 15 million people were collecting jobless benefits as of mid-May. More than one-quarter of those people face a cut in payments in coming weeks, according to the Century Foundation, a progressive think tank.


That’s because 25 states, all led by Republican governors, have said they are pulling out of the federal pandemic programs that provide enhanced unemployment pay. The reason: The benefits, including an extra $300 a week, are discouraging people from going back to work, according to the governors and many employers.

“Employers who are desperately seeking to fill positions grow frustrated with being in direct competition with state and federal unemployment benefits,” said Chris Carlozzi, Massachusetts state director of the National Federation of Independent Businesses.

The NFIB said Thursday that a record 48 percent of small-business owners in May reported unfilled jobs. The group said May was the fourth consecutive month of record-high readings for job openings and compared with a 48-year average of 22 percent.

While it’s obvious the labor market hasn’t returned to normal, the issue of enhanced jobless pay is a red herring, according to Andrew Stettner, a senior fellow at the Century Foundation.

“The faux panic around supposedly overly generous unemployment benefits tends to center on the rate of rehiring in the economy,” Stettner said. “But the fact is that the hiring situation has continued to steadily improve, along with the economy, independent of any changes to unemployment benefits.”

Smaller employers can be forgiven for being anxious about hiring. Many have been beat up for more than a year.

But unless the May jobs report out Friday is another big disappointment, we can probably cross labor shortage off the list of things to worry about.


Larry Edelman can be reached at larry.edelman@globe.com. Follow him @GlobeNewsEd.