The US economy added an astounding 272,000 jobs last month, well above the 180,000 that analysts had predicted.
Wall Street stock futures fell sharply on the news, as the continued strength of the job market makes it unlikely the Federal Reserve will cut interest rates anytime soon.
Last month’s strong job gains reflect the durability of America’s consumer-driven economy, as households across the country continue to spend steadily, forcing many employers to keep hiring to meet customer demand.
The Labor Department said Friday that the unemployment rate rose slightly from 3.9% to a still-low 4%, ending a 27-month streak of unemployment rates below 4%.
This was the longest such streak since the late 1960s.
Economists had expected the report to show employers added 180,000 jobs in May, roughly the same as April’s 175,000.
The main reason the economy is still generating strong net job gains is that layoffs remain at historically low levels.
Just 1.5 million people lost their jobs in April, the lowest monthly figure in 24 years of data outside the peak of the pandemic.
After years of struggling to replace staff, most employers are reluctant to lay off staff.
Ahead of Friday’s jobs report, there were tentative signs the U.S. economy was cooling in a way that would be welcomed by the Federal Reserve’s inflation-fighting officials: Companies were posting fewer jobs, consumer spending was falling and wage growth, while still healthy, was gradually slowing.
The trend contrasts with earlier in the year, when employment was strong and Americans were still spending reliably — factors that may have helped inflation hold up better than the Fed would have liked.
With the economy no longer appearing to be accelerating, economists and financial markets began to worry about the opposite scenario: What if the economy weakened more than necessary to quell inflation? Could we eventually slip into a recession?
The unemployment rate was expected to remain at 3.9%. Prior to May, the unemployment rate had remained below 4% for 27 consecutive months.
ADP released its own data for May, which showed that employers excluding government agencies added 152,000 jobs last month.
A steady increase in the employed population supports consumer spending, the main driver of the economy.
Frank Fiorill, vice president of compliance and data analytics at Paychex, a company that provides payroll services to small businesses, said last month that he has actually seen adoption accelerate among his clients.
“We’re still hearing pretty positive things about our Main Street family-owned small businesses,” Fiorill said.
Fed officials will be scrutinizing data on job growth and wage growth on Friday as they consider their next steps on interest rates, particularly when to start cutting the benchmark rate.
To combat inflation, the central bank has raised its policy interest rate 11 times since March 2022, and it is now at its highest level in 22 years.
Policy makers are due to meet next week to keep rates on hold while updating their economic outlook, and Chairman Jerome Powell is due to hold a news conference.
When the Federal Reserve began raising interest rates aggressively, most economists predicted that the resulting borrowing costs would skyrocket, triggering a recession and sending unemployment to sky-high levels.
But the job market has proven more durable than almost anyone expected.
Still, Americans remain frustrated by high prices, which remains a source of discontent and could jeopardize President Joe Biden’s reelection.
There are growing signs that the job market is returning to something closer to pre-pandemic normal.
The government said on Tuesday that job openings fell sharply for the second consecutive month in April to the lowest level in three years, though job openings remain well above pre-pandemic levels.
The number of Americans quitting their jobs has also returned to pre-pandemic levels, a stark contrast to two years ago, when the economic recovery from the pandemic led to a record surge in quits.
The decline in quits is helping to slow wage growth because workers typically leave when they find or think they can find a new, often higher-paying, job.
Moderate wage increases could help keep inflation in check, as companies typically pass on higher labor costs to customers through higher prices.
With post wire
