Washington – The country’s employers ramped up hiring in May, adding a solid 339,000 jobs, beating expectations and evidence of enduring strength in an economy the Federal Reserve is desperately trying to cool.
The government’s report released on Friday reflected labor market resilience after more than a year of rapid interest rate increases by the Federal Reserve. Many industries, from construction to restaurants to healthcare, are still adding jobs to keep up with consumer demand and restore their workforces to pre-pandemic levels.
However, there were some mixed messages in the jobs numbers, which also showed that the unemployment rate rose to 3.7%, from a five-decade low of 3.4% in April. The government compiles unemployment data using a different survey than the one used to calculate job gains. The two surveys can sometimes conflict.
The increase in the unemployment rate partly reflected a higher rate of layoffs, indicating that not all of those who lost their jobs in the recent cutbacks of tech companies, banks and media companies have found new jobs.
However, employment data is usually considered more reliable on a monthly basis because it is based on a larger survey of companies. The unemployment rate is derived from a smaller survey of households.
In a report on Friday, the government sharply revised its estimate of job growth in March and April by 93,000 additional jobs, underlining the resilience of the labor market.
In May, construction companies added 25,000 jobs, mostly in commercial construction and engineering. Health care providers took 75,000 jobs. And in professional and business services, a category that includes white-collar jobs such as accountants, engineers and architects, 64,000 jobs were added.
After imposing 10 consecutive rate hikes since March 2022, the Fed is widely expected to skip the rate hike when it meets later this month, although it may resume its increases after that. Chairman Jerome Powell and other Fed officials have made it clear that they consider strong hiring likely to keep inflation persistently high because employers tend to increase wages in a tight labor market. Many of these companies then pass the higher wage costs on to customers in the form of higher prices.
The May jobs report adds to another recent piece of evidence that the economy is still going strong despite long-standing expectations that a recession is approaching. Consumers ramped up their spending in April, even after adjusting for inflation, and new home sales rose despite higher mortgage rates.
However, some cracks are beginning to appear in the foundations of the economy. Home sales fell. The plant’s activity metric indicated that it had been contracted for seven consecutive months.
Consumers are showing signs of straining to keep up with higher prices. The share of Americans struggling to stay on top of credit card debt and auto loans rose in the first three months of this year, according to the Federal Reserve Bank of New York.
Fed officials are expected to forgo a rate hike at the June 13-14 meeting to allow time to assess how their previous rate hikes have affected underlying inflation pressures on the economy. High rates usually take time to affect growth and employment. The Fed wants to avoid raising the key rate so much that it slows borrowing and spending as much as it causes a deep recession.
The US economy as a whole was gradually weakening. It grew at a weak annual rate of 1.3% from January through March, after annual growth of 2.6% from October through December and 3.2% from July through September.
Many employers still engage in what is called “post-hiring,” particularly in sectors such as restaurants, hotels, and entertainment venues. Even with high customer demand in these industries, the number of workers employed remains below pre-pandemic levels.