U.S. job growth unexpectedly surged in May, as the labor market remained surprisingly resilient even in the face of rising interest rates, declining economic growth and chronic inflation.
Employers added 339,000 jobs in May, the Labor Department said in its monthly payroll report released Friday, easily beating the 190,000 jobs forecast by Refinitiv economists. That also marks an increase from April, when payrolls increased by an upwardly revised 294,000.
At the same time, a separate report, based on a survey of households, offered a slightly different picture of the labor market. The report indicated the unemployment rate climbed to 3.7% from 3.4%, even though the labor force participation rate remained unchanged last month. It was the highest jobless rate since October 2022.
Wage growth also cooled last month, with average hourly earnings – a key measure of inflation – rising 0.3%, in line with estimates. On an annual basis, wages rose 4.3% in May.
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The Federal Reserve is closely watching the report for evidence that the labor market is finally softening after months of strong job gains as policymakers try to wrestle inflation under control. Although the consumer price index has cooled from a peak of 9.1% in June, it remains about three times higher than the pre-pandemic average.
The stronger-than-expected jobs figure could be a worrisome sign for the Fed, which has raised interest rates 10 times over the past year.
“Another rate hike is in the bag,” said Seema Shah, the chief global strategist of Principal Asset Management. “May’s blow out jobs report, combined with an upward revision to April, means that the Fed’s job is not yet done. The key question now is: can they wait until July or does this monster payrolls number trigger another burst of urgency in the FOMC?”
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