Strong US Job Growth in May, Unemployment Rate at 3.7%
02 Jun 2023
US job growth outperformed forecasts in May, as the unemployment rate increased to 3.7%.
Despite a higher-than-anticipated gain in employment in the United States in May, the Federal Reserve may decide not to raise interest rates this month for the first time since beginning its aggressive policy-tightening campaign more than a year ago due to a deceleration in pay growth.
The Labour Department reported on Friday that nonfarm payrolls rose by 339,000 last month, according to the closely followed employment data. After data for April was updated, 294,000 new positions were added to the payroll, not the previously reported 253,000.
Reuters polled economists, who predicted a 191,000 increase in payrolls.
The unemployment rate increased from a 53-year low of 3.4% in April to 3.7% despite significant hiring.
Additionally, wage pressures are easing, which should provide some solace to Fed officials working to get inflation down to the 2% objective set by the U.S. central bank. After increasing by 0.4% in April, the average hourly wage increased by 0.3%. As a result, after rising 4.4% in April, the year-over-year growth in earnings was reduced to 4.3%. Prior to the pandemic, annual salary growth averaged roughly 2.8%.
Although further areas of weakness are developing, the report showed that the labour market remained robust and provided additional proof that the economy was still far from the predicted recession.
The services sector, which includes leisure and hospitality, is still catching up after businesses struggled to find employees over the previous two years, despite massive layoffs in the technology sector because of over-hiring during the COVID-19 pandemic and the drag from higher borrowing costs on housing and manufacturing. Several sectors, including healthcare and education, saw accelerated retirements.
Increased demand for services and the backfilling of these retirements are two factors contributing to job growth. Data released this week by the Labour Department showed that there were 10.1 million job openings at the end of April, with 1.8 vacancies for every unemployed person, underscoring the pent-up need for labour.
Most experts anticipate that payroll growth will last at least until the end of the year.
According to CME Group’s Fed Watch Tool, the probability that the Fed will maintain its policy rate at its meeting on June 13–14 was over 70% early on Friday. Since March 2022, the Fed has increased its benchmark overnight interest rate by 500 basis points.