U.S. employers added 559,000 jobs in May and the unemployment rate fell to 5.8%, offering fresh evidence that the reopening economy is accelerating while also exposing an unusual problem for a recovery still millions of jobs short of its pre-pandemic level: many employers say they cannot hire fast enough.

The Labor Department’s May employment report, released Friday, showed broad gains led by leisure and hospitality, which added 292,000 jobs as restaurants, bars, hotels and entertainment businesses reopened. Employment also rose in public and private education and in health care and social assistance. Even after the increase, nonfarm payroll employment remained 7.6 million below its February 2020 level.

The headline unemployment rate declined from 6.1% in April, but the labor force participation rate edged down to 61.6%. Those two movements underscore the central uncertainty in the recovery: the economy is creating jobs rapidly, yet millions of people who left the labor force during the pandemic have not returned.

A strong month, but not a complete recovery

The Bureau of Labor Statistics said the number of unemployed people fell by 496,000 to 9.3 million. Both figures remain well above their pre-pandemic levels. The agency’s commissioner’s statement emphasized that payroll employment has increased substantially from last spring’s collapse but has not recovered all of the jobs lost when large parts of the economy shut down.

May’s 559,000 gain followed a disappointing April increase that was revised upward but still came in far below expectations at the time. That volatility has complicated efforts to interpret the pace of recovery. The monthly data are being shaped simultaneously by reopening, vaccination, changing school schedules, supply disruptions, unemployment benefits, child-care constraints and workers reassessing where and how they want to work.

Leisure and hospitality remains at the center of those forces. The sector’s large May gain reflects the rapid return of in-person activity, but employment in the industry is still well below its February 2020 level. Employers in restaurants and hotels have increasingly reported difficulty filling open positions even as millions of Americans remain unemployed.

Businesses report worker shortages and rising wages

The Federal Reserve’s June Beige Book, released Wednesday, described an economy expanding at a moderate pace but constrained by difficulty finding workers and obtaining materials. Businesses across Federal Reserve districts reported that hiring remained challenging, particularly for lower-wage hourly positions, skilled trades and some professional occupations.

Employers are responding in part with higher pay. Average hourly earnings for all private-sector employees rose 15 cents in May to $30.33, according to the jobs report. The Senate Republican Policy Committee’s summary of the data highlighted the same wage increase while arguing that hiring difficulties warrant scrutiny of federal unemployment supplements. Democrats have countered that the labor market is still recovering from a historic disruption and that factors such as child care, health risks and occupational shifts are also keeping workers on the sidelines.

The debate is already producing policy changes. A number of Republican-led states have announced plans to end participation early in enhanced federal unemployment programs. The effect of those decisions will become clearer over the summer as businesses compete for workers and schools move toward more normal schedules.

Stimulus is fading while consumer demand remains strong

The labor market is also adjusting to a sharp change in household income. The Commerce Department’s Bureau of Economic Analysis reported in its April income and spending release that personal income fell 13.1% after surging in March when federal economic-impact payments were distributed. Consumer spending nevertheless rose 0.5% in April.

That combination is important for the next phase of the recovery. The extraordinary federal transfers that boosted household income earlier this year are receding, but accumulated savings and reopening demand continue to support spending. Businesses are therefore trying to rebuild staffing and inventories at the same time consumers are returning to travel, dining and other services they avoided during the pandemic.

The pressure is visible in prices as well as wages. The Federal Reserve’s Beige Book said input costs rose across industries, with businesses citing higher prices for materials, freight and labor. Some firms said they were passing those increases on to customers. The persistence of those pressures will be closely watched as policymakers debate whether the recent rise in inflation is temporary or more durable.

The participation gap remains the hardest problem

The labor force participation rate is one of the clearest signs that the recovery remains incomplete. The 61.6% May rate is below its pre-pandemic level, meaning a smaller share of the civilian population is working or actively looking for work. That helps explain how unemployment can fall even while businesses say millions of positions remain unfilled.

A Washington Post analysis of Friday’s report noted that the economy remains about 7.6 million jobs below February 2020 and that the pace of hiring is being shaped by unusual constraints on both employers and workers. A contemporaneous CBS News report likewise described the 559,000 gain as an improvement while emphasizing that the labor market still has substantial ground to recover.

The mismatch may ease as vaccinations expand, schools reopen more fully, unemployment programs change and households become more comfortable returning to workplaces. It may also reveal more lasting changes. Some workers have moved, retired, switched industries or decided that available jobs no longer meet their expectations for pay, scheduling or flexibility.

A recovery entering a more complicated phase

The May report is strong enough to confirm that the labor market is moving forward, but not strong enough to settle the debate over how quickly the economy can return to its pre-pandemic path. Nearly 560,000 new jobs in a month would be exceptional in normal times. In the aftermath of a crisis that eliminated more than 20 million jobs in two months last spring, it is evidence of both progress and the scale of unfinished work.

For policymakers, the next several reports will help distinguish temporary reopening frictions from structural changes in labor supply. For businesses, the immediate problem is more practical: demand is returning faster than some employers can rebuild their workforces. And for millions of people still outside employment, the recovery will not be complete until the headline gains translate into jobs they are prepared and able to take.