The US economy added 390,000 jobs in May, better than expected despite fears of an economic slowdown and the explosive pace of inflation, the Bureau of Labor Statistics reported on Friday.
Meanwhile, the unemployment rate held steady at 3.6%, just above its lowest level since December 1969.
Economists polled by Dow Jones were looking for non-farm payrolls to expand by 328,000 and for the unemployment rate to fall to 3.5%.
“Despite the slight slowdown, it is clear that a tight labor market is teetering on and ignoring fears of deflation,” said Daniel Zhao, chief economist at Glassdoor. “We continue to see signs of a healthy and competitive job market, with no signs of brakes yet.”
Average hourly earnings rose 0.3% from April, just below the 0.4% estimate. An annual wage increase of 5.2% came in line with expectations.
Stock market futures were volatile and point to a lower open on Wall Street after the report. Government bond yields rose.
Job gains were extensive. Leisure and hospitality, led by 84,000 jobs. Professional and commercial services increased by 75 thousand, transportation and warehousing contributed by 47 thousand, and construction jobs by 36 thousand.
Other areas that saw notable gains included public education (36,000), private education (33,000), health care (28,000), manufacturing (18,000) and wholesale trade (14,000).
Retail took a hit in the month, though, losing 61,000 in May, although the BLS noted that the sector remains 159,000 above the February 2020 level before the pandemic.
“That doesn’t really align with the consumer eager to spend on merchandise,” Drew Mattos, chief market strategist at MetLife Investment Management, said of the retail numbers. “The story of accommodation and food services tells you that people have switched from spending on goods to spending on services. The real question is how long they will continue to do so.”
Despite the job gains, the BLS Household Survey showed that the labor market has not yet recovered all the jobs lost during the pandemic. Total employment remains 440,000 below pre-Covid level.
The labor force participation rate has increased, rising to 62.3% although it is still 1.1 percentage points lower than February 2020, where the labor force is 207,000 less than this figure.
A more comprehensive measure of unemployment that takes into account those not looking for jobs and those taking part-time jobs for economic reasons rose to 7.1%, up a tenth of a percentage point from April. The unemployment rate for Asians fell to 2.4%, the lowest level in nearly three years, while the unemployment rate for Asians was 6.2%, an increase of 0.3 percentage points.
Revisions to job estimates in March and April cut 22,000 from previously reported totals.
Matos said the market reaction likely indicates that investors expect more Fed rate hikes and a slowing labor market. Federal Reserve officials said they are looking to return the jobs picture to balance from current high demand and a low labor supply.
“I wouldn’t call it the calm before the storm,” Matos said, “but it might be the last bit of sunlight before the clouds get a little deeper and darker.”
The report comes amid concerns about rising inflation along with geopolitical developments including war in ukraine And the Corona virus disease Restrictions in China may affect the US economy, which contracted at a rate of 1.5% in the first quarter.
Despite recent signs that inflation may be slowing, the current pace is still around the fastest in 40 years. Prices at the pump are specifically at historic highs, with a gallon of regular unleaded at $4.76, up 13% from last month and more than 56% from a year ago, according to AAA.
It comes as the economy slows which is currently on track to grow at just 1.3% in the second quarter, according to the Federal Reserve.
In an effort to control inflation, the Fed is trying to slow down the economy with a series of interest rate increases. Fed Governor Lyle Brainard told CNBC on Thursday It expects further increases in the coming months until inflation reaches the central bank’s 2% target.
Businesses have been hampered in the present environment, not least due to lack of workers which has left nearly two vacancies for every available worker. A Federal Reserve report earlier this week said companies are expressing increasing concerns about the outlook — eight of the central bank’s 12 regions reported slowing growth while four specifically cited recession fears.