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Fox – 32 Chicago
Hiring accelerated in May as employers added a robust 272,000 jobs despite stubborn inflation, high interest rates and intensifying household financial strains
The unemployment rate, which is calculated from a separate survey, rose from 3.9% to 4%, the highest since January 2022, the Labor Department said Friday.
Economists had estimated that 185,000 jobs were added last month, according to a Bloomberg survey.
Has wage growth slowed?
Average hourly pay rose 14 cents to $34.91, pushing up the yearly increase to 4.1%. Â Â
Wage growth generally has downshifted as COVID-related labor shortages have eased, but it’s still above the 3.5% clip that’s consistent with the Federal Reserve’s s 2% inflation goal.
Many Americans, meanwhile, are benefiting because typical pay increases have outpaced inflation the past year, giving them more purchasing power.
Is the Fed going to cut interest rates in 2024?
The report will likely not be well received by a Federal Reserve looking for a slowdown in wage growth, which feeds into inflation.
In recent weeks, Fed officials have repeatedly said it will take longer than expected to gain confidence that inflation is sustainably approaching the Fed’s 2% goal, delaying market-friendly interest rate cuts.
After easing significantly last year, inflation stayed high in the first quarter but showed signs of stabilizing in April.
Fed Chair Jerome Powell also has said a notably weakening labor market could prod the Fed to act even if inflation doesn’t slow as rapidly as officials hope. Friday’s strong job gains do little to meet that threshold, though the rising unemployment rate could raise some concerns,
Since March 2022, the Fed has raised its key short-term interest rate from near zero to a 23 year-high of 5.25% to 5.5%, but it has held it steady since last July as inflation has eased. Officials had forecast three rate cuts this year, propelling the stock market to new records. But futures markets are now predicting two cuts, with the first coming in September, and some economists think the central bank put could put off rate decreases until next year if inflation.
Several crosscurrents were poised to affect May’s payroll totals. Heavy rains crimped hiring in April and a return to more typical weather patterns last month likely provided a modest boost, says economist Ryan Sweet of Oxford Economics.
Another positive: May had an unusually large number of workdays because of a calendar quirk, lifting employment totals by 50,000 to 80,000, Goldman Sachs wrote in a note to clients.
Yet there were also hurdles. Although May is in the thick of the spring hiring season, many employers are still struggling to find workers post-COVID, a constraint that may have curtailed job gains after the figures were seasonally adjusted, Goldman says.
Is the labor force increasing?
Immigration, the research firm adds, has significantly expanded the labor pool and should continue to add about 50,000 potential workers a month in 2024 but it has slowed substantially since early this year.
Is 2% inflation realistic?: Should the Fed relax its 2% inflation goal and cut interest rates? Yes, some experts say.
An influx of high school and college students for the summer also should bolster the supply of workers but it’s not clear when that will occur because the timing of the end of the school year varies, Sweet says.
Is the job market good or bad right now?
More broadly, the job market has remained surprisingly resilient despite high inflation and interest rates, but it’s gradually cooling. After adding well over 200,000 jobs a month the first three months of the year, job gains slowed in April.
A separate Labor Department report this week showed that job openings fell to 8.1 million in April, the lowest tally since early 2021 and well below the record 12 million in early 2022. The number of job vacancies per unemployed worker has slipped to 1.2 from a high of 2 during the Great Resignation, in line with the pre-pandemic level.
And hiring stayed below the pre-COVID pace. Employment growth has remained strong because businesses have been hesitant to lay off workers following severe COVID-related labor shortages. But that effect is expected to fade in the second half of the year, with average monthly job gains falling to about 100,000.