U.S. Added 339,000 Jobs in May, a Surprise Surge

The number of jobs created in both March and April were also revised upward by a collective 93,000, bringing the three-month average in job growth for the period ending in May to roughly 283,000 positions added a month.

Across the board, hiring was strong, with professional and business services, government, leisure and hospitality, and construction all seeing significant gains in May. No industries were listed as seeing major declines, although a handful, including manufacturing and retail, saw little change.

The unemployment rate increased slightly to 3.7%, compared with 3.4% in April and the 3.5% consensus call among economists surveyed by FactSet.

The 0.3 percentage point jump in the unemployment rate was due in part to 130,000 more people entering the labor force in May. Economists view that as a sign of a healthy labor market because it means more people are coming off the sidelines. However, it came alongside a 440,000-person increase in the number of unemployed workers.

The closely watched labor-force participation rate held steady at 62.6% and remains well below its prepandemic level of 63.3%.

Wage growth slowed mildly, rising 0.3% in May and reaching a 4.3% annual pace, in line with economists’ expectations. That marks a subtle downshift from April’s surprise 0.5% jump and 4.4% annual gain.

Overall, the report reflects a buoyant labor market that is continuing to power through and create jobs despite high inflation, regional bank stresses, widespread uncertainty and 10 consecutive interest-rate hikes from the Federal Reserve.

“Employers across the U.S. are not acting as though a recession is on the horizon,” wrote Dave Gilbertson, a labor economist with payroll and human-resources company UKG. “In this labor market, it’s all about momentum, and right now, the momentum continues to be on the uptrend.”

The strength of today’s report presents a quandary for the Fed, which has long wanted to see a steady slowing of the labor market to reduce pressure on wage growth and help slow inflation. Headline jobs growth in May was far stronger than what the central bank would have liked to see, which puts the prospect of a June rate hike from the Fed on the table.

At the same time, both the mild uptick in the unemployment rate and slowdown in wage growth should encourage Fed officials—and could provide them with room to delay the next rate hike until July as they await further data on inflation and financial conditions.

“The key question now is can they wait until July or does this monster payrolls number trigger another burst of urgency in the FOMC?” wrote Seema Shah, chief global strategist with Principal Asset Management. “Overall, this is not a labor market that is slowing—and if [it’s] not slowing, then inflation isn’t coming down to 2%.”

Stocks were trading higher after the report, with
Dow Jones Industrial Average
and
S&P 500
futures up around 0.6%. Odds of a quarter-point rate hike in June are roughly 30%, according to the CME FedWatch Tool, a 10 percentage-point increase from a day ago.

Write to Megan Cassella at [email protected]