WASHINGTON – The US has been in a challenging economic condition since its Central Bank, the US Federal Reserve, embarked on a tightening monetary policy due to the excessive expansionary measures employed during the COVID-19 pandemic.

However, the Labor Market seems to be one of the few major aspects of the economy that may be considered an “outlier” during the difficult economic condition the US is in currently.

Optimism in the Labor Market

The US registered a significant job growth in May; the growth brings a promising outlook for the current tight US labor market. This comes despite a general negative consensus among US employers and an overall mitigated demand caused by the Federal Reserve’s tightening policy.

During the month of May, an additional 390,000 jobs were added. According to the Financial Times, this is “less than the upwardly revised 436,000 positions created during the previous period but more than economists had expected.” Meanwhile, the jobless rate remained at 3.6% in May; impressively, this is just 0.1% above the previous level pre-pandemic in February of 2020, when a black swan event in the form of COVID-19 pandemic spread around the world.

 Main Contributors to Labor Market’s Performance

Among all sectors of the Labor Market, the only industry to see job losses was in retail service, with the number of jobs dropping by 61,000. However, in terms of the total employment, the sector still surpassed its pre-pandemic job count in February of 2020, with a current total of 159,000.

In contrast, all other sectors saw an increase in their respective segments. According to the US Bureau of Labor Statistics, leisure and hospitality was among the sectors to see “notable” gains. More than 80,000 positions were added in May, with an additional 75,000 professional and business services jobs created on top of that. Meanwhile, the previously badly-hit segment of Transportation and Warehousing grew by 47,000 new jobs added in the same month.

“This was a very good, goldilocks report that so far is consistent with a soft landing,” said Ellen Gaske, an economist at PGIM Fixed lncome. “These job gains are coming alongside decelerating average hourly earnings so that potentially suggests the economic expansion could turn out to be fairly robust,” she added.

The Future of the Labor Market

With all the optimism in the market, Brian Rose, A Senior Economist at UBS, offers his skepticism. He mentioned that he expects monthly job growth to “slow soon, perhaps to around 100,000, given uncertainty about just how many more people are left to return to the labor force.”

He added, “We can’t sustain the payroll growth at this pace for very much longer. We are going to run out of people to come back to work after the pandemic.” Given the current projected trajectory of the labor market, Rose mentioned that the Federal Reserve is on track to “cool down the economy without causing undue pain.” However, other economists are less optimistic about the FED’s ability to pull off a “soft landing.” Regardless of the prominent medium to long-term projection of the labor market, the labor market’s growth will likely continue for several months to come during the current fiscal year. Best case, it could be enough time for the US economy to gain some ground, thus increasing demand and labor requirements.