The US economy continued to create jobs in May, reporting a better-than-expected increase in nonfarm payrolls despite multiple headwinds. Labor Department announced on Friday.
Employment in the public and private sector increased by 339,000 in the month, beating the Dow Jones forecast of 190,000, marking the 29th consecutive month of positive employment growth.
The unemployment rate rose to 3.7% in May, compared with the expected 3.5%, even though the labor force participation rate remained unchanged. The unemployment rate is the highest since October 2022 but remains close to the lowest since 1969.
Average hourly wages, a key inflation indicator, rose 0.3% in the month, in line with expectations. On an annualized basis, wages rose 4.3%, 0.1 percentage points below expectations. The average weekly working hours decreased by 0.1 hours to 34.3 hours.
The market reacted favorably to the news, with futures on the Dow Jones Industrial Average gaining about 200 points. Yields on government bonds also rose.
“The U.S. labor market continues to show grit amid turmoil, from inflation to massive job cuts to soaring gas prices,” said Becky Frankewitz, president and chief commercial officer of Manpower Group. ‘ said. “With 339,000 job openings, we are still rewriting the rulebook and the U.S. labor market continues to defy historical definitions.”
May’s surge in employment roughly matched the 12-month average of 341,000 in the job market, which has remained remarkably strong despite the economic slowdown.
Professional and business services led job creation in the month, with 64,000 net new jobs. The government helped boost the numbers by adding 56,000 jobs, and healthcare contributed 52,000 jobs.
Other notable increases included leisure and hospitality (48,000), construction (25,000) and transportation and warehousing (24,000).
The May jobs report was released in a difficult time for the economy, with many experts still expecting a recession later this year or early 2024.
Recent data shows that consumers continue to spend even as they put money into their savings and increasingly use credit cards to pay for purchases. Job vacancies topped 10 million again in April, while a resilient labor market is also helping to support spending as employers continue to struggle to fill vacancies.
As rival factions reached a debt ceiling deal in Washington this week, one potential major headache appears to have been lifted. After being passed by the House and Senate this week, the agreement is being sent to President Joe Biden’s desk for signature.
However, there are still challenges ahead.
The U.S. Federal Reserve (Fed) has raised interest rates 10 times since March 2022 to combat persistent inflation. In recent days, some policy makers have said they would put a pause on a string of rate hikes in June to see how tightening policy would affect the economy.
Other data points show that the economy’s manufacturing sector is shrinking, even as the much larger service sector continues to expand. The ISM manufacturing index released on Thursday also showed prices rebounding, a positive sign for the Fed.
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