The U.S. added a higher-
than-expected 390,000 new jobs in May, signaling the labor market is still going strong despite some fraying around the edges.
Economists polled by The Wall Street Journal had forecast a smaller increase of 328,000 new jobs after reports leading up to the government’s employment survey had hinted at slower hiring last month.
The increase in jobs was the smallest in 13 months and breaks a string of 12 straight gains of at least 400,000 or more. Yet economists say employment growth was bound to slow as the U.S. recovered most of the jobs lost during the pandemic.
The unemployment rate was unchanged at 3.6%, the government said Friday, and remained just a tick above the pre-pandemic low.
In premarket trades, stocks were little changed after the jobs report.
Wall Street investors and the Federal Reserve were on full alert before the May employment report. Investors are looking for clues the economy is beginning to soften as the central bank moves to sharply raise interest rates to curb the highest inflation in 40 years.
The Fed, for its part, would like the red-hot labor market to cool off a bit to prevent further upward pressure on inflation. Wages have soared in the past year and are now adding significantly to the cost of doing business.
Hourly wages rose 10 cents, or 0.3%, to $31.95 in May.
The increase in worker pay over the past year slowed to 5.2% from 5.5%, however. While wages have risen at the fastest pace since the early 1980s, the gains appear to be tapering off.
Even with bigger paychecks, workers still can’t keep up with the cost of living.
Inflation has climbed 8.3% over the past year, and while it’s expected to slow, Americans can’t expect much relief in the near future.
Wall Street and Washington want a Goldilocks kind of labor market: Not too hot, but not too cool.
The longer the labor market sizzles, the higher wages could go as businesses scramble for workers. That could worsen inflation and lead to a dreaded wage-price spiral, which the U.S. hasn’t seen since the 1970s.
Yet if the jobs market cooled off too much, it could dampen consumer spending and add to growing worries about a recession. The economy is all but certain to decelerate owing to higher interest rates.
The ultrahigh-pressure U.S. job market may finally be starting to release a little steam.
- That's the key takeaway from new job numbers that show an extremely healthy labor market that nonetheless seems to be moving toward a less overheated state.
Employers added 390,000 jobs in May, the Labor Department said — the lowest job growth in a year. The unemployment rate was unchanged at 3.6%, holding close to the lowest levels seen in the past half-century.
- Other details suggested the job market starting to come into balance. The number of adults in the labor force — either working or looking for work — rose by 330,000.
- Wage growth, while still strong at 0.3% for the month, receded from its recent highs. Over the last year, average hourly earnings are up 5.2%, compared to 5.5% in April.
Policymakers at the Federal Reserve and in the Biden administration want to see a labor market that is still healthy but cools from its red-hot levels seen earlier in the year, which tend to fuel higher inflation.
- "If average monthly job creation shifts in the next year from current levels of 500,000 to something closer to 150,000, it will be a sign that we are successfully moving into the next phase of recovery," President Biden wrote in a Wall Street Journal op-ed this week.
- "This kind of job growth is consistent with a low unemployment rate and a healthy economy."
- In that sense, the May numbers are what they hope to see — a gradual deceleration in the labor market, but not a sudden stop.
Policymakers are attempting a difficult, and potentially impossible, a task in trying to cool off inflation pressures without a recession. But things went according to plan in May.