Amid solid job numbers, a North Carolina economist sees troubling headwinds

Kenan Institute Research Economist Sarah Dickerson characterizes the latest national jobs report as “solid and steady.” But if you are looking for employment this summer, Dickerson says the job market does not appear to be strengthening, either.

The Bureau of Labor Statistics released the May jobs report Friday, showing 172,000 jobs added to the U.S. economy.

“Hiring is essentially going to be concentrated in a few sectors — healthcare, leisure and hospitality. Government jobs that were added were predominantly local government jobs,” said Dickerson in a briefing with reporters. “In terms of healthcare, one reason why we’ve continued to see jobs concentrated in this sector has to do with our population aging, but also some of that burnout that has held over from the pandemic.”

Dickerson says while the nation’s unemployment rate has held steady at 4.3% for the last two months, there’s limited broad-based hiring. North Carolina’s unemployment rate stands at 3.7%.

“We’re continuing to see more of this low-hire, low-fire environment,” said Dickerson.

For recent college graduates, unemployment is higher than it is for all workers, aged 16 to 65. And the gap between recent college graduates and all workers is widening, according to Dickerson.

AI and automation are just part of the reason, she said. Remote employers are also hiring fewer new graduates.

“Remote employers may not be as eager to hire, train and mentor recent college graduates, knowing that they’re going to have to go through that entire process remotely,” Dickerson explained.

That’s backed up by a new study by the Federal Reserve Bank of New York that found unemployment among young people increased by almost one full percentage point between 2017-19 and 2022-24. Young graduates in in-person jobs saw a larger increase in unemployment at the start of the pandemic, but their job prospects returned to normal faster than those of recent graduates looking for remote jobs.

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Dickerson says it’s also worth noting the decline in foreign-born labor, disproportionally impacting agriculture and construction.

“When we have this loss of immigrant labor for these sectors, it’s going to contribute to gaps in the labor force. What that means in turn is that employers are going to need to raise wages in order to fill roles,” said Dickerson.

With employers paying workers more in those industries, consumers can expect to see higher prices for food and for housing.

Core inflation, which excludes food and energy, hit an annual rate of 3.3% in April. And Dickerson said households are spending more than their income supports, with personal savings down this year.

“A lot of Americans are relying on gas in order to get to work, pick their kids up from school, and go to their doctors’ appointments. We can’t just stop going to the pumps filling up our cars,” Dickerson said. “Many of us need to continue to spend that money, even if our incomes aren’t supporting it at this time.”

Higher energy prices tied to geopolitical uncertainty will likely continue well into the summer.

So as Americans dip into savings or rely more on credit, gross domestic product growth may actually appear stronger.

“This isn’t going to necessarily be sustainable for the long run,” said Dickerson.