WASHINGTON, US – Hiring in the United States heated up again in May, according to government data released on Friday, with the strong labor market defying expectations of a slowdown amid efforts to cool the world’s biggest economy.
The jobs market has been surprisingly robust even as regulators have worked to ease demand and tamp down inflation, with the central bank lifting interest rates 10 times since early last year.
While the expectation has been that higher rates will slow the economy, with elevated borrowing costs making it pricier to borrow funds for major purchases or business expansion, the latest numbers could prove challenging for policymakers mulling a pause in rate hikes.
The United States added 339,000 jobs last month, surpassing estimates and picking up from a revised 294,000 figure in April, the Labor Department said on Friday.
The jobless rate ticked up to 3.7 percent, rising from a historically low level of 3.4 percent.
But in a more welcome sign, wage gains moderated slightly with average hourly earnings up by 0.3 percent, slightly down from 0.4 percent in April, the report said.
“Today is a good day for the American economy and American workers,” President Joe Biden said in a statement.
He added that the jobless rate has been below four percent for 16 straight months, noting the long stretch of low unemployment.
Wage stress not building
“The data show that job growth is continuing at a rapid pace, but wage pressures are not building,” said Rubeela Farooqi, chief US economist at High Frequency Economics.
Compared with a year ago, average hourly earnings were up 4.3 percent, said the Labor Department.
Although hiring and unemployment both rose in the latest report, analysts said that the pick up in the jobless rate was not due to an increase in the labor force participation rate.
The difference comes as the Labor Department uses two separate surveys each month to compile its “employment situation summary” – with the unemployment rate calculated from a household survey and job gains or losses coming from an establishment survey.
“The two surveys can diverge quite substantially but over time they tend to signal the same thing,” Farooqi told AFP.
Nationwide chief economist Kathy Bostjancic added that “looking at a three-month moving average of both shows less of a gap.”
Room for pause
Sectors that saw job gains last month included professional and business services, health care and construction, said the Labor Department report.
But although the employment numbers were well above what analysts expected, Farooqi believes the wage data could still give the Federal Reserve room to hold policy steady.
Fed policymakers are set to convene in mid-June, and some senior central bank officials have indicated this week that they might support skipping a further hike at their upcoming meeting.
A key factor is that officials are eyeing the lagged effects of existing rate hikes as they ripple through the economy while deciding if more action is needed.
A particular area of concern is that strong demand for workers and continued wage growth could feed into inflation. But if wage gains are not rising, this could ease pressure on policymakers.
“Several Federal Reserve officials have signaled that they are likely to hold rates steady at their upcoming June meeting but are unlikely to reduce rates anytime soon,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association.
“This somewhat mixed jobs report is likely to support that approach,” he added.