Employers in the United States added an amazing 339,000 jobs during the month of May, signaling a solid increase in the nation’s employment activity. The labor market has managed to maintain its strength in spite of worries over ongoing inflation and rising interest rates.
However, the unemployment rate, which is calculated by a separate poll of households, jumped from its five-decade low of 3.4% to 3.7%, marking the highest level since October. This rise came about as a result of an increase in the labor force participation rate.
Economists, who had expected that around 195,000 jobs would be added to the economy during the month, would be surprised and impressed by this news. Additionally, the updated payroll data for the months of March and April indicated an even greater hiring trend throughout the late winter and early spring, with a total upward adjustment of 93,000 jobs. This was due to the fact that the data was changed to include more recent information.
In spite of the Federal Reserve’s vigorous attempts to curb hiring and wage growth via interest rate rises, as well as its efforts to fight inflation, the job market has shown a remarkable capacity to withstand these pressures.
However, the latest employment report for May, which displayed outstanding growth, plus the imminent publication of possibly alarming inflation statistics might potentially undermine the intention of the Federal Reserve to stop rate rises at their meeting this month. Both of these factors are scheduled to be released later this month.
The benchmark S&P 500 index
The benchmark S&P 500 index, which measures the performance of the broad stock market, reached a new high of 4,282 on Friday, increasing by 61 points, or 1.4%, during trading in the early afternoon hours of that day.
Similarly, the Dow Jones Industrial Average finished the day at 33,697, reflecting a huge increase of 635 points, or 1.9%, above its previous level. These indexes enjoyed a big lift after the publication of the employment report, which held added importance for the market as a result of the fact that it highlighted a slowing in pay growth despite the market’s perception of stronger hiring. The fact that salaries are believed to be a factor that influences inflation caused investors to take notice of this new development.
What is the annual percentage increase in wages?
In a more promising indication, average hourly wages increased 11 cents to $33.44, bringing down the annual gain to 4.3% from 4.4%. This occurred despite the hiring frenzy that occurred the previous month. The Federal Reserve ought to take some comfort from the fact that wage gains and inflation are continuing to progressively reduce as a result of this.
“The data show that job growth is continuing at a rapid pace, but wage pressures are not building,” says Rubeela Farooqi, chief U.S. economist of High-Frequency Economics. “The data also show that wage growth is not building.” She believes that despite the robust increases in employment, the Federal Reserve should be able to maintain its plan to leave interest rates unchanged this month due to the moderate rise in the average salary.
Which sectors of the economy are producing more jobs?
With a growth of 64,000 jobs, the professional and business services sector led the pack. The industry that was most impacted by the epidemic, leisure, and hospitality, gained 48,000 jobs, most of which were in restaurants and bars. Construction added 25,000 jobs. Healthcare employment increased by 52,000. 56,000 new positions were created by the government, the majority of which were in state and municipal agencies.
The manufacturing industry, which has been on a downward trend for the last six months, shed 2,000 jobs. In recent months, there has been a general slowing in job growth as interest rates have risen and there has been an increase in worries of a recession; nonetheless, the data have been variable. Companies that are experiencing workforce shortages as a direct result of the epidemic are continuing to hire more people and reduce their number of layoffs. In recent months, employment growth has been helped along by weather that has been unusually warm.
Despite the fact that labor shortages continue to be a problem for companies, they have been improving in most parts of the United States as people who were forced to stay home because of the epidemic begin to look for jobs again. According to Goldman Sachs, firms that are still having trouble finding workers tend to hire those workers earlier in the year in preparation for the spring hiring season. This results in a reduced labor supply, which is anticipated to slow the development of employment opportunities in May.
According to the research organization, there is often a recovery in hiring in the month of June when high school and college students look for summer work.