US employers boost hiring in May; unemployment rate jumps to 3.7%

Washington, June 2 (BNA): U.S. job growth accelerated in May, but a rise in the unemployment rate to a seven-month high of 3.7% suggests labor market conditions are softening, which could give the Federal Reserve cover to waive interest. . rate hike this month.

The increase in the unemployment rate from a 53-year low of 3.4% in April, the Labor Department reported Friday, was driven mostly by blacks. It was also the result of more people entering the labor market, an increase in supply that reduces pressure on companies to increase wages.

Wage growth moderated last month, which should provide some relief to Federal Reserve officials struggling to bring inflation back to the US central bank’s 2% target. The closely watched employment report provided further evidence that the economy is far from a dreaded recession, despite weakness in the interest rate-sensitive manufacturing sector and housing market, Reuters reported.

“US companies are still hiring aggressively, and are likely to meet elastic consumer demand,” said Sal Guattieri, chief economist at BMO Capital Markets in Toronto.

“However, other areas of softness in this report suggest that the labor market is losing steam. There will likely be enough softness in this report for the Fed to pass a rate hike at the next meeting.”

A survey of enterprises showed non-farm payrolls increased by 339 thousand last month. Economists polled by Reuters had expected an increase in jobs by 190 thousand. The economy created 93,000 more jobs in March and April than previously expected.

The economy needs to add 70,000 to 100,000 jobs a month to keep up with growth in the working-age population.

Despite massive layoffs in the tech sector after companies overhired during the COVID-19 pandemic and a pushback from rising borrowing costs on housing and manufacturing, the services sector, including leisure and hospitality, is still catching up after struggling. Companies to find workers more than the past two years. Industries such as health care and education have also experienced accelerated retirements.

Filling in these retirements and increasing demand for services are some of the factors driving job growth. The pent-up demand for workers was underlined by Labor Department data this week showing there were 10.1 million job vacancies at the end of April, with 1.8 job vacancies for every unemployed person.

US stocks opened higher. The dollar stabilized against a basket of currencies. US Treasury bond prices fell.

Last month, professional and business services added 64,000 jobs, with temporary help, seen as a harbinger of future employment, and a recovery. Government employment increased by 56,000, but it is still 209,000 jobs below the pre-pandemic level.

The healthcare sector added 52,000 jobs, mostly in ambulatory healthcare services and hospitals. Leisure and hospitality salaries increased by 48,000, supported by restaurants and bars. Employment in the industry remains 349,000 below the pre-pandemic level. Employment in the construction sector increased by 25 thousand, while transportation and storage added 24 thousand jobs.

But manufacturing payrolls softened and there were moderate job gains in mining, quarrying, oil and gas extraction as well as wholesale and retail trade and financial activities.

Most economists expect overall job growth to continue at least through the end of the year.

Average hourly earnings gained 0.3% after rising 0.4% in April. This reduced the annual increase in wages to 4.3% after rising 4.4% in April. Annual wage growth averaged about 2.8% before the pandemic hit.

Early Friday, financial markets saw a more than 70% chance of the Fed keeping interest rate unchanged at its June 13-14 meeting, according to CME Group’s FedWatch tool. The Fed has raised its benchmark interest rate overnight by 500 basis points since March 2020, when it embarked on the fastest monetary policy tightening campaign since the 1980s.

The household survey from which the unemployment rate is calculated showed employment falling by 310,000 in the past month, likely reflecting an ongoing strike by 11,500 members of the Writers Guild of America. The Labor Department’s Bureau of Labor Statistics, which compiles the employment report, did not record work stoppages in the May strike report.

The decline in domestic workers was coupled with an increase in the labor force by 130k to boost the unemployment rate. The black unemployment rate jumped to 5.6% from 4.7% in April.

“This could be statistical noise, or it could be a sign that black workers are disproportionately bearing the brunt of unemployment,” said Nick Pinker, head of economic research at Indeed Hiring Lab.

The labor force participation rate, or the share of working-age Americans who have or are looking for a job, was unchanged at 62.6%.

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