Job growth in US tops estimates, signaling optimism on economy
U.S. employers hired at a robust pace in May while wage gains held firm, suggesting the economy continues to power forward as the Federal Reserve raises interest rates at a steep pace to tame redhot inflation.
Nonfarm payrolls increased 390,000 last month after a revised 436,000 gain in April, a Labor Department report showed Friday. The unemployment rate held at 3.6%, and the labor force participation rate crept higher.
The median estimate in a Bloomberg survey of economists called for a 318,000 advance in payrolls and for the unemployment rate to fall to 3.5%.
The report suggests that employers had success filling open positions in the month. While Fed policy makers are seen pressing on with more interest-rate hikes, greater labor participation may eventually help to further restrain wage growth that’s feeding inflationary pressures.
Average hourly earnings rose a less-than-forecast 0.3% from April. They were up 5.2% from a year earlier, a slowdown from 5.5% in the prior month.
The dollar and Treasury yields jumped after the report. Traders were pricing in about 200 basis points of additional rate hikes over the next five Fed meetings.
The Fed has adopted a more aggressive monetary policy stance in an effort to curb decades-high inflation, and has indicated that it will raise rates by a half point in both June and July. While those efforts are likely to ease price pressures, they also risk eventually leading to softer demand for labor, particularly in interestrate sensitive sectors like housing and construction.
The figures may provide some comfort to President Joe Biden and Democrats as they face a difficult challenge defending their thin congressional majorities in the November midterm elections. Even so, rapid price gains have far outweighed plentiful jobs in polls of Americans that have shown unhappiness with the economy and disapproval of Biden’s performance.
Biden is scheduled to speak later Friday morning about the jobs report.
At the same, overall job growth is expected to slow in the coming months as the labor market reaches pre-pandemic employment levels and the unemployment rate holds at a historically low level. That means monthly payrolls gains of a half million or more, as experienced over the last two years, are likely over for the U.S..
Job growth in May was led by steady hiring in leisure and hospitality, business services, and education and health care.
Leisure and hospitality added 84,000 jobs in May, most of which were in accommodation and food services.
Employment in business and professional services rose 75,000 and payrolls increased by 74,000 in education and health care.
Construction employment registered a 36,000 increase, the most in three months.
Still, payrolls in the industry are at risk of cooling eventually against a backdrop of higher mortgage rates that have been slowing demand for housing.
The labor force participation rate — the share of the population that is working or looking for work — rose to 62.3%, and the rate for workers ages 25-54 climbed to a pandemic-high of 82.6%.
Overall participation has been slow to recover to pre-pandemic levels after many Americans left their the workforce for good during the pandemic, in part due to child care challenges and early retirement.