May pickup in payrolls

May 31, 2024

Payroll employment is expected to rise by 200,000 in May, a slight increase from the 175,000 we saw in April. A pickup in hiring at the state and local levels, which was the primary reason for somewhat weaker hiring in April, is the driver for that gain.

Public sector payrolls are expected to rise by 40,000 in May, after barely budging in April. Job openings at state and local governments remain elevated as many infrastructure projects are still ramping up along with investments in education. Some 13 states have already announced programs for universal preschool, including children from three to four years of age, depending on the state. Many more states are hoping to expand universal preschool, given the ongoing crisis in childcare; providing childcare is now ranked as a competitive advantage for states when competing for firms and workers.

Women were working one hour less per week in 2023 versus 2019, while men’s hours worked held steady, according to research by ADP. That is undermining their ability to care and provide for their families; the data suggests it is not a choice for many. Women’s participation in the labor market hit a new high in April but continues to lag most of our developed and many developing counterparts around the world. Childcare and parental leave policies are the primary differentiator. Even full-time workers have had to cut their hours to deal with childcare gaps since the onset of the pandemic.

Private sector payrolls are expected to continue to be dominated by healthcare and social services. The latter includes employment in childcare facilities, which finally passed the peak hit in February 2020 in the Fall of 2023. That is 18 months after the rest of the labor market peaked; such facilities were already scarce prior to the crisis. 

Employment in nursing and residential care facilities was still 3.5% below February 2020, which was off the peak hit in mid-2019. That was despite the growing need for assisted living and care for an aging population.

Job postings in childcare, which tend to be low-wage jobs, were still growing faster than other sectors according to analysis by the Indeed hiring lab. That speaks to ongoing shortages.

Average hourly earnings are expected to rise by 0.3%, slightly faster than the pace we saw last month. That translates to a 3.9% gain from a year ago, the same as in April and still nearly one percent above the pace in February 2020.

Separately, the unemployment rate is expected to hold at a 3.9% pace, which would mark the 28th consecutive month below 4%. That would overtake the record of the late 1960s. We have to go back to the early 1950s to see lower unemployment. The number of those out on vacation and those who work part-time due to childcare problems are expected to remain elevated during the month. The ranks of those taking parental leave, a benefit that was expanded during the pandemic, are also expected to remain elevated. Millennials, who dominate the labor markets, are in the thick of the childcare crisis.