The US economy added 172,000 jobs in May, surpassing economist forecasts. The unemployment rate held steady at 4.3% for the third month. Wage growth slowed to 3.4% annually. Market expectations suggest the Federal Reserve will maintain its benchmark interest rate.
The U.S. economy added 172,000 jobs in May, exceeding economists' expectations of 85,000 and indicating a strengthening labor market. This figure follows an upwardly revised 179,000 jobs added in April. The unemployment rate held steady at 4.3% for the third consecutive month. Economists estimate that between 0 and 50,000 jobs per month are needed to keep pace with the working-age population, a rate that has been impacted by reduced labor force growth due to an immigration crackdown. Businesses are exhibiting caution in hiring, influenced by past tariffs and the current U.S.-Israeli war with Iran, which has led to increased oil prices. Despite these uncertainties, fiscal stimulus in the form of tax and tariff refunds has supported corporate profits, allowing companies to avoid large-scale layoffs. Financial markets anticipate the Federal Reserve will maintain its benchmark interest rate between 3.50% and 3.75% into 2027. The leisure and hospitality sector led job growth, with 70,000 jobs added, and local government employment increased by 55,000. Healthcare added 35,000 jobs, while financial activities employment dropped by 22,000. Annual wage growth slowed to 3.4% from 3.6% in April.
The stronger-than-expected jobs report provides a mixed signal for the Federal Reserve, potentially delaying interest rate cuts as inflation concerns persist, while also indicating resilience in the US economy.