The US economy added 272,000 jobs in May, a sign the labor market remained strong amid high interest rates, the Bureau of Labor Statistics announced on Friday.
The number of May jobs was far higher than the 190,000 economists had expected and topped April’s gains, when a revised 165,000 jobs were added to the economy. The report offered a mixed view of the jobs market. The unemployment rate rose to 4% for the first time since January 2022, up from 3.9% in April.
The White House celebrated the news, which comes amid enduring public skepticism about the economy. “The great American comeback continues, but we still have to make more progress,” Joe Biden said in a statement. “On my watch, 15.6 million more Americans have the dignity and respect that comes with a job.”
Unemployment has now been at or below 4% for more than two years – the longest streak in over 50 years. But the pace of hiring had slowed considerably in recent months, from 315,000 new jobs in March to 175,000 new jobs a month later.
That month-over-month decrease was taken as good news by Wall Street, as a cooling labor market could encourage the Federal Reserve to cut interest rates. The latest report is likely to reinforce the Fed’s resolve to keep rates high.
Though Wall Street had long hoped interest rates would come down by the summer, officials at the Fed continue to be skeptical about a rate decrease amid disappointing inflation figures. Inflation was at 3.4% in May, still above the Fed’s targeted rate of 2%.
Previous signs of cooling in the labor market included the Bureau of Labor Statistics’ job openings and labor turnover survey from earlier this week, which showed there were just over 8m open job positions in the US at the end of April, the lowest number since February 2021 and down 1.8m over the year.
According to the executive outplacement firm Challenger, Gray & Christmas, layoff figures have held steady, with US-based employers announcing 63,816 jobs cuts in May, around the same number of cuts announced in April. Layoffs are down 20% from this time last year, when a handful of major tech companies were announcing job cuts.
The Fed will hold its next federal open market committee meeting next week and is expected to announce on 12 June whether officials will change interest rates. Interest rates are currently at 5.25% to 5.5%, the highest rates in nearly two decades.
On Thursday the European Central Bank cut its interest rate for the first time in almost five years but few expect the Fed to follow suit this week.
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At their last meeting in early May, Fed officials said inflation was still too high above their targeted rate of 2% to cut rates. In May, inflation stood at 3.4% – higher than its peak of 9.1% in June 2022, but also above the rate in June 2023, when it hit 3%. Inflation has not been below 2% since February 2021.
“It is likely that gaining confidence will take longer than previously expected,” Jerome Powell, the Fed chair, said after the meeting in May.
Federal officials are trying to manage a tough balancing act in seeking to bring price increases down to a manageable level without offsetting the labor market too much.
