WashingtonIn May, U.S. employers hired more people than expected and kept up a fairly strong rate of wage increases. These are both signs of a strong labour market, which will keep the Federal Reserve on a path of aggressively tightening monetary policy to cool demand.
Friday’s closely watched employment report from the Labor Department showed that the unemployment rate stayed the same at 3.6% for the third month in a row, even though more people joined the labour force. It painted a picture of an economy that is still growing, but only at a slow rate. Investors are worried about a recession next year because the U.S. central bank is raising interest rates and making money tighter.
Christopher Rupkey, chief economist at FWDBONDS in New York, said, “The economy is a long way from being wrecked by a recession as long as it keeps hiring workers at this fast of a rate.” “It’s not slowing down enough to put out the fire of inflation. The Fed still has work to do. “
The survey of businesses showed that the number of jobs outside of farms went up by 390,000 last month. Data for April was changed to show that payrolls went up by 436,000 jobs instead of the 428,000 jobs that were first thought. Even though May’s job growth was the smallest in a year, it was still much higher than the monthly average before the COVID-19 pandemic in 2020.
There are only 822,000 fewer jobs than before the recession. Most industries have brought back all the jobs they lost during the pandemic. The only ones that haven’t are leisure and hospitality, manufacturing, healthcare, wholesale trade, and local government education.
Reuters polled economists, and they said that payrolls would grow by 325,000 jobs last month. Estimates ranged from 250,000 new jobs to 477,000 new jobs.
The almost all-around increase in hiring was led by the leisure and hospitality industry, which added 84,000 jobs, 46,000 of which were in restaurants and bars. Leisure and hospitality jobs are still 1.3 million fewer than they were in February 2020.
Payrolls in transportation and warehousing, as well as professional and business services, went up a lot. There were 36,000 more jobs in construction, and 18,000 more in manufacturing. Manufacturing jobs are 17,000 fewer than they were before the pandemic. 57,000 more people got jobs with the government.
Retail, on the other hand, lost 61,000 jobs. The drop was almost everywhere in retail, and 32,700 jobs were lost in general merchandise stores. Retailers like Walmart and Target have said that high inflation is hurting their profits. Amazon (NASDAQ:AMZN) said that some of its warehouses had too many workers.
The Fed is trying to slow down the demand for jobs to stop inflation, which is rising at rates not seen in 40 years. At the end of April, there were 11.4 million job openings, which meant that nearly two jobs were available for every unemployed person.
The prices of stocks on Wall Street fell. The dollar went up compared to a group of other currencies. The prices of U.S. Treasuries fell.
Graphic: https://graphics.reuters.com/USA-STOCKS/egvbkwgawpq/nfpr.png Nonfarm payrolls
SUPPLY IMPROVES
The average hourly wage went up by 0.3%, the same as in April. This made the annual rise go from 5.5 percent in April to 5.2 percent, which is still a lot. Some economists saw this as proof that wage inflation had reached its peak and was starting to go down. The growth of wages for supervisory workers slowed down, which kept people from making as much money.
The average hourly wage for production and non-supervisory workers went up by 0.6% and by 6.5% from one year to the next.
A senior U.S. economist at Capital Economics in New York, Michael Pearce, said that the Fed won’t be able to say it’s making significant progress toward its inflation goal until annual wage growth slows down to around 4%.
Since March, the Fed has raised its key interest rate by 75 basis points. At its next meetings this month and in July, it is likely to raise the overnight rate by a half-point each time. On Thursday, Fed Vice Chair Lael Brainard said she didn’t see much reason to stop in September.
High inflation makes it harder for people to buy things and for businesses to invest, but economists say that the economy is still strong and that any downturn would probably be mild. The outlook for the economy has also been hurt by a weakening global environment, which has been caused in part by Russia’s war with Ukraine and China’s zero-COVID policy.
Details from the household survey that were used to figure out the unemployment rate were pretty positive. After going down in April, household employment went up by 321,000 jobs.
Participation rate: https://graphics.reuters.com/US-STOCKS/lbpgndxbmvq/participation.png
About 330,000 people went to work for the first time. Because of this, the labour force participation rate, which is the percentage of Americans of working age who have a job or are looking for one, went up from 62.2 percent in April to 62.3 percent in May. The rate of participation among people in their prime years went up by two-tenths of a point, to 82.6 percent. It is four tenths below where it will be in February 2020.
About 397,000 women aged 20 and up joined the workforce. This made their participation rate go up from 58.0 percent in April to 58.3 percent in May. People, even some retirees, have to go back to work because the cost of living is going up. Long-term unemployment was at 1.4 million, which was the lowest level since 2020 and down from 1.5 million in April.
But the number of people working part time because of the economy went up by 295,000 to 4.3 million. This shows that more workers had their hours cut due to a lack of work or bad business conditions, which could be a warning sign.
David Kelly, chief global strategist at J.P. Morgan Asset Management in New York, said, “The report should give some comfort that the economy has enough momentum to handle the rate hikes the Fed plans to make in the coming months.” “However, more people looking for work and slower wage growth are signs that the economy can settle into a slow, steady growth path with low inflation if the Fed is patient enough to let it.“