Hiring accelerated in May as employers added a robust 272,000 jobs despite stubborn inflation, high interest rates and intensifying household financial strains
The unemployment rate rose from 3.9% to 4%, highest since January 2022, the Labor Department said Friday.
Economists had estimated that 185,000 jobs were added last month, according to a Bloomberg survey.
Several crosscurrents were poised to affect May’s payroll totals. Heavy rains crimped hiring in April and a return to more typical weather patterns last month likely provided a modest boost, says economist Ryan Sweet of Oxford Economics.
Another positive: May had an unusually large number of workdays because of a calendar quirk, lifting employment totals by 50,000 to 80,000, Goldman Sachs wrote in a note to clients.
Yet there were also hurdles. Although May is in the thick of the spring hiring season, many employers are still struggling to find workers post-COVID, a constraint that may have curtailed job gains after the figures were seasonally adjusted, Goldman says.
Is the labor force increasing?
Immigration, the research firm adds, has significantly expanded the labor pool and should continue to add about 50,000 potential workers a month in 2024 but it has slowed substantially since early this year.
An influx of high school and college students for the summer also should bolster the supply of workers but it’s not clear when that will occur because the timing of the end of the school year varies, Sweet says.
Is the job market good or bad right now?
More broadly, the job market has remained surprisingly resilient despite high inflation and interest rates, but it’s gradually cooling. After adding well over 200,000 jobs a month the first three months of the year, job gains slowed in April.
A separate Labor Department report this week showed that job openings fell to 8.1 million in April, the lowest tally since early 2021 and well below the record 12 million in early 2022. The number of job vacancies per unemployed worker has slipped to 1.2 from a high of 2 during the Great Resignation, in line with the pre-pandemic level.
And hiring stayed below the pre-COVID pace. Employment growth has remained strong because businesses have been hesitant to lay off workers following severe COVID-related labor shortages. But that effect is expected to fade in the second half of the year, with average monthly job gains falling to about 100,000.