Economy Matters: May Jobs Numbers & Fed Outlook
The labor market remained buoyant in May, according to the latest employment report from the Bureau of Labor Statistics (BLS). In addition to muddying the waters with respect to the U.S. economic outlook, this month’s jobs report also complicates Federal Reserve interest rate policy. Here’s the lowdown:
Nonfarm payrolls grew by 339,000 during the month, the 29th consecutive increase and the largest since last September. Moreover, job growth figures for March and April were revised upward. The same report showed the unemployment rate climbed to 3.7%, still very low by historic standards, from a record-matching 3.4% a month ago. Upward wage pressure remained in evidence in May. Average hourly earnings rose 0.3% compared to April and 4.3% on a year-over-year basis. Nonetheless, was down from increases approaching 6% in the winter and spring of 2022.
The clear takeaway is that the labor market remains on a roll, despite sharply higher interest and inflation rates. Notwithstanding occasional reports of mass layoffs at high profile companies, there has been little sign of a broad-based downturn, or even of a slowdown in hiring. May’s 339,000 increase in nonfarm payrolls was close to the average over the last 12 months.
In contrast, the average monthly increase in payrolls was just under 200,000 between March 2010, the end of the Great Recession labor market rout, and February 2020, the eve of the onset of the COVID-19 pandemic.
Some Fed officials have recently been signaling a potential pause in rate hikes that have taken the federal funds rate from near zero in March 2022 to 5% currently. A pause may still be in the cards in June, but this report increases the likelihood that the Fed is not yet done raising rates.
June 2nd, 2023
