U.S. employers boost hiring in May
WASHINGTON — U.S. job growth accelerated in May, but a jump in the unemployment rate to a seven-month high of 3.7 per cent suggested that labour market conditions were easing, which could give the Federal Reserve cover to forgo an interest rate hike this month.
The increase in the unemployment rate from a 53-year low of 3.4 per cent in April reported by the Labour Department on Friday was mostly driven by Blacks. It was also partly the result of more people entering the labor force, an increase in supply that is reducing pressure on businesses to raise wages.
Wage growth moderated last month, which should offer some comfort to Fed officials battling to bring inflation back to the U.S. central bank’s two per cent target. The closely watched employment report offered more evidence that the economy was far from a dreaded recession, despite weakness in the interest-rate sensitive manufacturing sector and the housing market.
“American businesses are still aggressively hiring, likely to meet resilient consumer demand,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
“However, the other areas of softness in this report suggests that the labour market is losing steam. There’s likely enough pockets of softness in this report for the Fed to pass on raising rates at the next meeting.”
The survey of establishments showed nonfarm payrolls rose by 339,000 jobs last month. Economists polled by Reuters had forecast payrolls increasing by 190,000. The economy created 93,000 more jobs in March and April than previously estimated.
The economy needs to add 70,000-100,000 jobs per month to keep up with growth in the working-age population.
Despite massive layoffs in the technology sector after companies over-hired during the COVID-19 pandemic and the drag from higher borrowing costs on housing and manufacturing, the services sector, including leisure and hospitality, is still catching up after businesses struggled to find workers over the last two years. Industries like healthcare and education also experienced accelerated retirements.
The backfilling of these retirements and increased demand for services are some of the factors driving job growth. Pent-up demand for workers was underscored by Labour Department data this week showing there were 10.1 million job openings at the end of April, with 1.8 vacancies for every unemployed person.