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US economy adds more jobs than expected in May as unemployment rate rises
The US labor market added more jobs than expected in May, defying previous signs of a slowdown in the economy.
Data from the Bureau of Labor Statistics released on Friday showed that the labor market added 272,000 non-farm jobs in May, increases significantly greater than the 180,000 expected by economists.
Meanwhile, the unemployment rate rose to 4% from 3.9% the previous month. Job additions in May were significantly higher than 165,000 jobs added in April.
The print highlights the difficulty the Federal Reserve faces in determining when to lower interest rates and how quickly. Overall, the economy and job market held up and inflation remained sticky, defending the maintenance of higher rates for longer. However, some cracks have emerged, such as signs of inflationary pressure low-income consumers It is increase in household debt.
“They’re really walking a tightrope here,” Robert Sockin, senior global economist at Citi, told Yahoo Finance about the central bank. He noted that the longer the Fed keeps rates stable, the more fissures could appear in the economy.
Wages, considered a key metric for inflationary pressures, rose 4.1% year over year, reversing a downward trend in the previous month’s annual earnings. On a monthly basis, wages increased 0.4%, an increase from the previous month’s 0.2% gain.
See more information: How does the job market affect inflation?
“To see more confidence that inflation could ease over time, you would really like to see the wage numbers look a little lower than we saw them today,” said Lauren Goodwin, economist and chief market strategist at New York. York Life Investments. Yahoo Finance.
Also in Friday’s report, the labor force participation rate fell to 62.5% from 62.7% the previous month. However, participation among workers of working age, aged between 25 and 54, increased to 83.6%, its highest level in 22 years.
The biggest job gains in Friday’s report were in healthcare, which added 68,000 jobs in May. Meanwhile, public employment created 43,000 jobs and leisure and hospitality created 42,000 jobs.
The report comes as the stock market reached records amidst a series of weaker than expected economic data, which increased investor confidence that the Federal Reserve could reduce interest rates from September onwards. After Friday’s labor report, that trend reversed, with investors forecasting a 53% chance that the Fed will cut rates in September, down from the roughly 69% chance seen just a day earlier. according to the CME FedWatch tool.
“We were anticipating the start of rate cuts in September, totaling [two]cuts this year, but persistent strong employment gains increase the likelihood of later rate cuts,” wrote Nationwide Chief Economist Kathy Bostjancic in today’s May employment report.
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See more information: What the Fed’s Rate Decision Means for Bank Accounts, CDs, Loans and Credit Cards
An American flag flies from a crane as a construction worker helps build a mixed-use apartment complex on January 25, 2024, in Los Angeles, California. (Mario Tama/Getty Images) (Mario Tama via Getty Images)
Other data released this week reflected a labor market still resilient this is showing more signs of normalizing to pre-pandemic levels. O latest survey on job vacancies and labor turnover (JOLTS), released on Tuesday, showed that job openings fell in April to the lowest level since February 2021.
In particular, the ratio between the number of job vacancies and unemployed people returned to 1.2 in May, which is in line with pre-pandemic levels.
“We believe job growth continues at a solid pace, but there are ample signs that the heat in the labor market over the past few years has largely been wiped out,” wrote Sarah House, senior economist at Wells Fargo, in a note to customers on Friday.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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