The U.S. economy continued to crank out jobs in May, with nonfarm payrolls surging more than expected despite multiple headwinds, the Labor Department reported Friday.
Payrolls in the public and private sector increased by 339,000 for the month, better than the 190,000 Dow Jones estimate and marking the 29th straight month of positive job growth.
The unemployment rate rose to 3.7% in May against the estimate for 3.5%, even though the labor force participation rate was unchanged. The jobless rate was the highest since October 2022, though still near the lowest since 1969.
Average hourly earnings, a key inflation indicator, rose 0.3% for the month, which was in line with expectations. On an annual basis, wages increased 4.3%, which was 0.1 percentage point below the estimate. The average workweek fell by 0.1 hour to 34.3 hours.
Markets reacted positively to the report, with futures tied to the Dow Jones Industrial Average up about 200 points. Treasury yields rose as well.
May’s hiring jump was almost exactly in line with the 12-month average of 341,000 in a job market that has held up remarkably well in an economy that has been slowing.
Professional and business services led job creation for the month with a net 64,000 new hires. The government helped boost the numbers with an addition of 56,000 jobs, while health care contributed 52,000.
Other notable gainers included leisure and hospitality (48,000), construction (25,000) and transportation and warehousing (24,000).
May’s job numbers come amid a challenging time for the economy, with many experts still expecting a recession later this year or early in 2024.
Recent data has shown that consumers continue to spend, though they are dipping into savings and increasingly using credit cards to pay for their purchases. A resilient labor market also has helped underpin spending, with job openings rising back above 10 million in April as employers still find it difficult to fill open positions.
One major potential headache appears to have been eliminated, as warring factions in Washington this week have reached a debt ceiling deal. An agreement is on its way to President Joe Biden’s desk for a signature following passage in the House and Senate this week.
There remain other issues ahead, though.
The Federal Reserve has raised benchmark interest rates 10 times since March 2022 in an effort to fight inflation that hasn’t gone away. In recent days, some policymakers have indicated a willingness to take a break in June from the succession of hikes as they look to see what impact the policy tightening is having on the economy.
Other data points have shown that the manufacturing sector of the economy is in contraction, though the much larger services sector has held in expansion. The ISM manufacturing index released Thursday also showed that prices are pulling back, a positive sign for the Fed.