The U.S. added 559,000 jobs in May, adding to hope about the pandemic recovery.

Many employers report having trouble finding applicants. Economists say the labor market may simply need time to get sorted out.

Daily Business Briefing

June 4, 2021Updated June 4, 2021, 10:05 a.m. ET

Many employers report having trouble finding applicants. Economists say the labor market may simply need time to get sorted out.

Workers’ pay rose again in May, but at a slower rate.The Fed wanted a string of strong jobs reports. It’s getting bumpy progress instead.Global finance leaders start high-stakes talks to overhaul the world’s tax system.Our reporters’ analysis and reactions to the jobs report.These are the other indicators economists are watching to understand the labor force.

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-7.6 million since February 2020

152.5 million jobs in February 2020

Hiring accelerated in May, with the government reporting on Friday that employers added 559,000 workers, about twice the previous month’s gains.

The unemployment rate fell to 5.8 percent, the Labor Department reported.

As infections ebb, vaccinations spread and businesses reopen, the economy has started to regain its footing, but the path has not been smooth. Job growth bounced up and down in recent months, and may continue its uneven progress throughout the summer, analysts said.

“It’s probably going to be a bumpy ride from here till September,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

The labor force participation rate edged down slightly to 61.6 percent, evidence that many workers who dropped out of the work force during the pandemic have still not returned. That has been vexing to employers who have complained about a lack of response to help-wanted ads.

“We’re making good progress to getting back to full employment,” said Carl R. Tannenbaum, chief economist for Northern Trust, “but it will be a number of months before we reach that goal.”

The biggest job gains were in leisure and hospitality as people returned in droves to bars and restaurants. The education, health care and social assistance sectors also showed growth. Construction jobs shrank, a trend that some economists link to glitches in the supply chain.

Job postings on the online jobs site Indeed were up 27 percent at the end of May from their level in February 2020, before the pandemic hit.

Nearly half of small-business owners surveyed by the National Federation of Independent Business in May said they were struggling to fill slots. Many employers have blamed enhanced pandemic-related unemployment benefits for the shortage of workers, which has prompted 25 Republican-led states withdraw from some or all of the federal jobless assistance programs in the coming weeks, months ahead of their expiration.

Most economists have pushed back against this argument and say the reality is more complicated. A lack of child care, continuing health concerns, low wages and competing priorities all probably play a larger role, they say.

“Is there a labor shortage?” Ms. Farooqi asked. “In my mind, absolutely not. There is a ramping-up effect, and that is going to persist for a little bit. You have to expect some frictions.”

At the beginning of the pandemic, job postings plummeted much faster than job searches, said Julia Pollak, a labor economist at the online jobs site ZipRecruiter. Now, there is a similar dynamic: Postings have picked up much more quickly than search activity.

“It’s just a matter of time,” said Ms. Pollak, who pointed out that many prime-age workers were only recently able to get their first Covid-19 vaccination.

She also said there was a mismatch between the type of jobs being offered and those being searched for. More than half of seekers want remote work, while only 10 percent of employers are offering that option.

The average monthly gain over March, April and May was about 540,000 positions. If that rate continues, it will be well into 2022 before the labor market returns to pre-pandemic levels.

The number of people who have been unemployed over a long haul — more than 26 weeks — dropped to 3.8 million, roughly 40 percent of the total.

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Hourly pay rose in May, but more slowly than in April — a possible sign that labor supply constraints are easing.

Average earnings for all workers rose 15 cents an hour in May, down from a 21-cent gain in April, the Labor Department said Friday. There was a similar slowdown in gains for nonsupervisory workers.

Economists are watching pay particularly closely because it is a key indicator of how much trouble employers are having attracting and retaining workers. Many companies, particularly in the service sector, have been complaining that they are struggling with hiring as they try to return to business as usual. Pay data from April lent credence to those complaints, showing significant increases in average pay, particularly in the leisure and hospitality sector.

Pay for non-supervisors in leisure and hospitality jumped again in May, but by less than half as much as in April. Still, those workers have seen significant pay gains in recent months: Their average earnings were $15.90 an hour in May, up from $14.80 in April. That continues a pattern of surprisingly strong wage growth, particularly for low-wage workers, during the pandemic.

Another sign that employers are having an easier time finding workers: Leisure and hospitality workers worked fewer hours last month. That followed a big jump in working hours in April.

Lael Brainard, a Federal Reserve governor, said she expected to see “further progress on employment in coming months.”Credit…Cliff Owen/Associated Press

The Federal Reserve was hoping for months of strong job gains that would swiftly return the economy to maximum employment — but the decent-but-not-great May employment gain underlined that although the labor market is healing, progress is bumpy.

Employers added 559,000 jobs last month, below the 675,000 new jobs that economists surveyed by Bloomberg had expected. That gain would be strong in normal times, but it came after a sharp hiring slowdown in April, and with the economy still 7.6 million jobs
short of its prepandemic level.

The Fed is closely watching employment data as it assesses when to dial back its mass bond purchases, which help to make many borrowing cheap and stoke the economy.

Central bank officials have said they need to see “substantial” further progress toward their two goals — maximum employment and stable inflation — before scaling down that bond buying. They have an even higher hurdle for lifting interest rates: They want to see a return to full employment and inflation that is expected to stay above 2 percent for some time before raising rates from rock bottom.

Inflation has been moving higher this year, but Fed officials have said they expect much of the pop in prices to be temporary. And when it comes to jobs, many have been clear that the economy remains well shy of their target.

“I expect to see further progress on employment in coming months,” Lael Brainard, a Fed governor, said earlier this week. “That said, today employment remains far from our goal.”

Randal K. Quarles, the Fed’s vice chair for supervision, said in a recent speech that he expected price gains to meet the Fed’s criteria for slowing bond buying later this year. But he said the labor market offered reasons for patience.

Officials had been hoping for a quicker rebound than the one that has materialized. Jerome H. Powell, the Fed chair, said at an April event that “we want to see a string of months like that,” referencing a recent jobs report that had showed a near-million jobs.

As central bankers focus on jobs, investors are also trained on the data, because they are trying to figure out when the Fed will begin to cut back on buying of government-backed bonds. The Fed has been buying about $120 billion worth of debt each month in a program called quantitative easing. Those purchases tend to push asset prices higher, and the announcement of a policy shift has the potential to be disruptive: Markets jerked wildly when the Fed in 2013 hinted that it would slow a post-financial crisis quantitative easing program.

Treasury Secretary Janet L. Yellen will meet with Finance ministers from the Group of 7 nations in London.Credit…Erin Scott for The New York Times

Finance ministers from the Group of 7 nations started two days of high-stakes meetings in London on Friday, seeking to keep the global economic recovery on course and to make progress in a long-sought overhaul of the international tax system.

The summit is the first in-person gathering of top officials from the world’s advanced economies since the pandemic emerged in early 2020 and turned such events into virtual affairs. As they huddle at London’s Lancaster House, officials are expected to discuss how much additional fiscal support their countries require, how to help developing countries gain access to vaccine supplies and ways to collaborate more effectively to combat climate change.

For Treasury Secretary Janet L. Yellen, who is making her first international trip as President Biden’s top economic diplomat, a key priority will be gathering support behind a broad agreement that aims to put an end to global tax havens in hopes of finalizing a deal by July.

The talks began with additional urgency as Mr. Biden continues to try to raise taxes on American corporations, including those that are profitable but report no federal income tax liability. Business groups and Republicans have complained that raising taxes in the United States will put American companies at a global disadvantage and provide an incentive for firms to move overseas.

The Biden administration is pushing for a global minimum tax to try to prevent that from happening. The United States has expressed support for a global tax of at least 15 percent and offered a separate proposal that would put an additional levy on the world’s largest 100 companies that would be paid to countries based on where goods or services are sold. The Biden administration hopes that such a pact would curb offshoring and stop the spread of digital services taxes in Europe that it believes are unfairly targeting American technology companies.

The G7 countries include Britain, Canada, France, Germany, Italy, Japan and the United States.

The meetings with be the first test of Ms. Yellen’s deal making ability as Treasury secretary. She met on Thursday evening with Rishi Sunak, Britain’s chancellor of the Exchequer, who has yet to publicly back the U.S. proposals. Ms. Yellen said on Twitter that it was a “great conversation” about shared priorities.

Ms. Yellen is scheduled to meet with the rest of her G7 counterparts along with Paschal Donohue, the Irish finance minister who is attending in his capacity as Eurogroup president. Ireland, which has a tax rate of just 12.5 percent and is not part of the G7, has expressed its opposition to the global minimum tax proposals.

A Treasury official said this week that the meetings could conclude without resolution over critical details such as a minimum tax rate. The United States hopes that the talks will yield momentum going into the Group of 20 meeting that will be held next month in Italy, the official said.

The top economic officials from Spain, Italy, France and Germany expressed optimism on Friday morning that the tax negotiations, which have been going on for several years, are on track. In an essay published in The Guardian newspaper, they suggested that the new negotiating approach from the Biden administration was more constructive than the tactics of the Trump administration, which walked away from the bargaining table last year.

“With the new Biden administration, there is no longer the threat of a veto hanging over this new system,” they wrote, adding that they thought a global tax agreement could be done by July. “It is within our reach.”

Deborah Solomon

The fact that the labor force participation rate was essentially flat is going to create more pressure on President Biden and Democrats to transition the unemployment insurance supplement into a hiring bonus.

Patricia Cohen

The desire for remote work seems to be one reason why face-to-face jobs in restaurants and bars are going unfilled. A ZipRecruiter survey found 44 percent of people want remote work even after the pandemic ends.

Patricia Cohen

There is a mismatch between the type of jobs employers are offering and the type that workers want. More than half of people searching on ZipRecruiter want remote work. Just 10 percent of employers are offering that.

Neil Irwin

The boom in teenage employment is real. The jobless rate among 16- to 19-year-olds dropped from 14.8 percent in January to 9.6 percent in May.

Patricia Cohen

Most economists don’t expect job creation to really go into overdrive until the fall when schools reopen, enhanced unemployment benefits end and more people are fully vaccinated.

Employers across the country in recent months have complained that they cannot find enough workers, despite an unemployment rate that remains higher than before the pandemic.

Not all workers may come rushing back as the pandemic recedes. Some older workers have probably retired. Other families may have discovered they can get by on one income or on fewer hours. That could allow labor shortages to persist longer than economists expect, Ben Casselman reports for The New York Times.

The simplest way to track the supply of available workers is the labor force participation rate, which reflects the share of adults either working or actively looking for work. Right now it shows plenty of workers available, although the Labor Department doesn’t provide breakdowns for specific industries.

Another approach is to look at the ratio of unemployed workers to job openings, which provides a rough measure of how easy it is for businesses to hire (or, conversely, how hard it is for workers to find jobs). Data from the Labor Department’s Job Openings and Labor Turnover Survey comes out a month after the main employment report, but the career site Indeed releases weekly data on job openings that closely tracks the official figures.

Both those approaches have a flaw, however: People who want jobs but aren’t looking for work don’t count as unemployed. Constance L. Hunter, chief economist for the accounting firm KPMG, suggests a way around that problem: the number of involuntary part-time workers. If companies are struggling to find enough workers, they should be offering more hours to anyone who wants them, which should reduce the number of people working part time because they can’t find full-time work.

“The data is not necessarily going to be as informative as it would be in a normal recovery,” Ms. Hunter said. “I would not normally tell you coming out of a recession that I’m going to be closely watching involuntary part-time workers as a key indicator, but here we are.”

William Ackman, the chief executive of Pershing Square Tontine Holdings, a special purpose acquisition vehicle.Credit…Drew Angerer for The New York Times

William Ackman’s jumbo special purpose acquisition company has finally found its big deal: It is closing in on an agreement to buy a 10 percent stake in Universal Music Group, the home of artists like Taylor Swift, at a $42 billion valuation.

If completed, the transaction would be the biggest involving such a fund, known as a SPAC, to date — and it would certainly be among the most complex, the DealBook newsletter notes.

Mr. Ackman’s SPAC, Pershing Square Tontine Holdings, would invest $4 billion for a 10 percent stake in Universal, of which the French conglomerate Vivendi owns 80 percent and China’s Tencent owns 20 percent.

There would still be $1.5 billion left in the SPAC, and that would be rolled into a new publicly traded vehicle into which Ackman’s Pershing Square hedge fund could put more money. That vehicle would then look for another acquisition target.

Vivendi had already been planning to take Universal public in Amsterdam; those plans will go ahead, meaning that unlike a traditional SPAC deal, Pershing Square Tontine won’t give Universal its stock listing. SPAC investors would instead get Universal’s shares when it later goes public.

The complex transaction is unlike any other SPAC deal, and in many ways doesn’t resemble a SPAC at all. Vivendi is a clear winner, because it would get another major investor for Universal at a higher valuation than Tencent had given the music label earlier this year.

The outcome for Pershing Square Tontine’s various investors is more complicated. Mr. Ackman’s hedge fund would end up owning 29 percent of the so-called SPARC, which stands for special purpose acquisition rights company, giving it a greater percentage of the vehicle than it had in the original SPAC.

SPAC investors would receive a stake in the new vehicle, which would not have a two-year limit to find a deal like a traditional SPAC. Assuming that various financial maneuvers are fulfilled, the new fund could have up to $10.6 billion to spend on a new takeover.

But investors would not get a vote on the SPAC’s Universal deal — if one is reached — or whatever future transaction the SPARC makes. And there is no guarantee that the SPARC will find a suitable deal, especially since Pershing Square Tontine had struggled to identify a suitable target.

Shares in Pershing Square Tontine plunged 14 percent in after-hours trading on Thursday after news reports about the Universal transaction emerged, but were down 7 percent in premarket trading on Friday. They remain above the blank-check firm’s $20 I.P.O. price, but down from a high of more than $30 a few months ago.

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The S&P 500 climbed on Friday after the Labor Department’s monthly jobs report showed an increase in hiring in May compared with a surprisingly low number the month before.

U.S. employers added 559,000 jobs in May, the government said and the unemployment rate fell to 5.8 percent. Investors and policymakers are trying to deduce what is happening in the labor market, in which millions of people are unemployed but some employers say they are struggling to hire.

The slower than expected increase in jobs is likely to give the Federal Reserve more time before policymakers consider pulling back monetary stimulus. The jobs report “is allowing investors to relax a little about the prospect of Fed tightening,” Mike Bell, a strategist at JPMorgan Asset Management, wrote in a note.

The yield on 10-year Treasury notes fell 3 basis points, or 0.03 percentage point, to 1.60 percent, as investors bet interest rates would stay lower for longer.

An index of the U.S. dollar, which tracks the currency against major peers, fell 0.4 percent.

Oil prices rose. Futures on West Texas Intermediate, the U.S. crude benchmark, climbed 0.5 percent to $69.18, the highest since late 2018.

Travel stocks

Travel and tourism stocks fell in Europe after Britain removed Portugal from the list of countries people could travel to without quarantining on their return. Britain also didn’t add any new countries to the list, citing rising coronavirus cases.

Earlier on Friday, shares in Rolls-Royce, which makes and services engines for airliners, fell 3 percent, and was the worst performer in the FTSE 100 in Britain. IAG, which owns British Airways, dropped 1.3 percent after falling 5.4 percent on Thursday when the changes to the travel list were announced. EasyJet and Wizz Air shares declined about 6 percent this week.

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