Labor Department data showed that the U.S. economy continues to create jobs, and nonfarm payrolls increased more than expected in May despite multiple headwinds.
Payrolls for both the public and private sectors increased by 339,000 in January, which is better than the Dow Jones estimate of 190,000. This marks the 29th consecutive month with positive job growth.
The unemployment rate increased to 3.7%, compared with the estimated 3.5% in May. However, the rate of labor force participation remained unchanged. The unemployment rate is the highest it has been since October 2022. However, it remains near to the lowest level since 1969.
The average hourly wage, a key indicator of inflation, increased by 0.3% in the last month. This was consistent with expectations. Annually, wages increased by 4.3%. This was 0.1 points below expectations. The average weekly work time decreased by 0.1 hours to 34.3.
The Dow Jones Industrial Average futures rose about 200 points in response to the report. Treasury yields also rose.
The hiring increase in May was nearly identical to the average for the past 12 months of 341,000 jobs in an economy which has been slowing.
The month saw a net of 64,000 new jobs created in the professional and business services sector. Government added 56,000 new jobs while the health care sector contributed 52,000.
Leisure and hospitality (48,800), construction (25,000) and transportation and warehouses (24,000) were also notable gains.
The May job numbers are coming at a time when the economy is still facing challenges. Many experts expect a recession to begin in early 2024 or later this year.
Recent data shows that consumers are still spending, even though they are using their savings less and credit cards more to pay. The resilient labor market has also helped to support spending. Job openings rose above 10 million again in April, as employers continue to struggle filling open positions.
A major headache has been avoided after Washington’s warring factions reached an agreement on the debt ceiling this week. After passing in both the House and Senate, an agreement is headed to Joe Biden for signature.
Other issues remain to be addressed.
Since March 2022, the Federal Reserve has increased benchmark interest rates ten times in an attempt to combat inflation. Some policymakers in recent days have expressed a willingness for a June break from the series of interest rate hikes to assess the impact on the economy.
Other data have shown the manufacturing sector is contracting, while the larger services sector continues to grow. The ISM manufacturing indicator released on Thursday showed that prices were also pulling back. This is a good sign for the Fed.