U.S. Job Growth in May Exceeds Expectations

The U.S. economy saw an addition of 172,000 jobs in May, with the unemployment rate holding steady at 4.3%, according to a report from the Labor Department released on Friday.

Economists had forecasted an increase of 85,000 jobs, which is actually a bit higher than previous estimates ranging from 55,000 to 110,000. They also anticipated that the unemployment rate would remain unchanged.

In April, the job count was adjusted upward by 64,000, bringing the total for that month to 179,000, while March’s numbers were modified by 29,000, leading to a total of 214,000 jobs. This means a net gain of 93,000 jobs over those two months.

Interestingly, this marks the third consecutive month that economists have underestimated job growth. When you consider a three-month average that smooths out monthly ups and downs, job growth stands at over 188,000, which many see as a clearer measure of the labor market’s vitality.

Private sector job growth totaled 120,000, far exceeding the consensus estimate of 90,000. Additionally, the forecast for April was revised from 123,000 to 177,000 jobs.

Manufacturing saw a rise of 7,000 jobs, which came as a surprise given earlier projections suggested a reduction of 2,000 jobs, a figure that later was revised to show no change. There was a notable increase in durable goods, with 17,000 more jobs added, including 3,600 specifically in auto and parts manufacturing.

Jobs in the mining sector, which includes oil and natural gas drilling, increased by 4,000, while construction added 17,000 positions.

On the services side, 92,000 jobs were created, with leisure and hospitality being the most significant contributor, as those sectors increased salaries by 70,000. The health and social assistance sectors also grew, adding 47,500 jobs.

In contrast, retail and wholesale trade saw declines, and transportation and warehousing added only 600 jobs. The finance and information sectors contracted, whereas professional and business services managed to add 6,000 jobs.

The federal government added 1,000 jobs in May, breaking a streak of two months with layoffs. Federal payrolls are down by 311,000 compared to a year ago, likely reflecting efforts by President Donald Trump to privatize aspects of the U.S. economy. Compared to the peak in October 2024, federal jobs have decreased by 346,000.

State governments have cut about 4,000 positions, while local governments have added 55,000 jobs.

Average hourly wages for private sector workers rose by 0.3%, with an overall increase of 3.4% over the year. However, average weekly working hours have remained stable.

The labor market in the U.S. is undergoing a significant transformation, moving away from reliance on immigrant workers. Some economists suggest that what might appear to be weak job data compared to past years could actually suggest healthy, or even strong, growth under the current circumstances.

Many now believe that the “break-even” rate for job creation—meaning the number of jobs needed to keep unemployment stable—may actually be zero. In the past, particularly between 2021 and 2024, the economy needed to add over 100,000 jobs monthly to keep pace with workforce growth.

Another factor influencing labor force growth is retirement, as many baby boomers are leaving the workforce, and younger generations aren’t fully filling the gap.

This month, the labor force grew by 83,000, while the population increased by 99,000, keeping participation steady at 61.8%. The total number of reported employed individuals rose by 149,000, while the number of unemployed decreased by 66,000.