The US jobs market left expectations in the dust last month, according to new data from the Labor Department.
Nonfarm payrolls increased by 339,000 jobs in May, significantly more than the 190,000 jobs expected by analysts and above the revised total of 294,000 in April. A gain of 190,000 would have been the smallest gain since December 2020.
Unemployment rose to 3.7% from 3.4%, the highest rate since October 2022. Average hourly earnings, considered an inflation indicator, rose 0.3%, in line with expectations.
The hot labor market came despite economic turmoil. Employers are still hiring even amid high interest rates and a potential recession.
There have certainly been high-profile layoffs over the past six months, but the data suggests many companies are still bringing on new workers, particularly in service industries.
Professional and business services saw the most significant gains, with net 64,000 new hires. Government added 56,000 jobs, health care contributed 52,000 and hospitality gained 48,000.
Conversely, self-employment jobs dramatically declined by 369,000.
Looking ahead, the question is whether the opposing forces of a hot labor market and rising interest rates will eventually collide.
“While overall the jobs market performance has been surprisingly strong, I think the labor market can’t defy the gravity of Fed rate hikes forever,” said Sarah House, an economist at Wells Fargo, as The New York Times reported.
The next rate decision will follow the Fed’s meeting on June 13 and 14.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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