Key facts
- May jobs report showed 172,000 jobs added, exceeding expectations of 88,000.
- Revisions to March and April added a combined 93,000 jobs.
- Unemployment rate held steady at 4.3%.
- Average hourly earnings rose 3.4% year-over-year, below inflation.
- The strong jobs report may delay Federal Reserve interest rate cuts.
The U.S. labor market showed unexpected strength in May, adding 172,000 jobs, significantly surpassing economists' expectations of 88,000. Revisions to previous months' data also revealed a stronger hiring trend, with March and April combined showing 93,000 more jobs than initially reported. Despite this robust hiring, the unemployment rate remained steady at 4.3%, and average hourly earnings saw their slowest annual increase in four years, rising 3.4% which is below the current inflation rate.
Sectors like leisure and hospitality, local government, and health care saw significant job gains. However, financial activities and transportation/warehousing experienced job cuts. The strong labor market data is likely to influence the Federal Reserve's upcoming monetary policy decisions, potentially leading to a delay in anticipated interest rate cuts. Elevated borrowing costs, particularly mortgage rates, are expected to persist, impacting housing affordability and inventory.
This resilient labor market suggests the economy is not stalling, but the implications for investors are mixed due to the potential for prolonged higher interest rates.