U.S. Adds 272,000 Jobs in May, Surpassing Expectations as Unemployment Rate Rises to 4%
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Henry Russell
Henry Russell
TLDR
U.S. Bureau of Labor Statistics, reported that the U.S. economy added 272,000 jobs in May 2024, far surpassing the expected 190,000. Despite the strong job growth, the unemployment rate increased to 4%, the first time it has reached this level since January 2022.
The nonfarm payroll expansion of 272,000 jobs marks a significant increase from the 165,000 jobs added in April. This substantial growth was driven by notable gains in several key sectors, including health care, government, and leisure and hospitality.
Elizabeth Ann Sonders, Chief Investment Strategist at Charles Schwab, commented on the mixed nature of the report, stating, “On the surface, [the report] was hot, but you've also got a bigger drop in household employment. For what it's worth, that tends to be a more accurate signal when you're at an inflection point in the economy. You can find weakness in the underlying numbers.”
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Despite the increase in job numbers, the unemployment rate edged up to 4% from April's 3.9%. The labor force participation rate also decreased slightly to 62.5%. The household survey revealed a decline in full-time workers by 625,000, while part-time employment rose by 286,000.
Average hourly earnings exceeded expectations, rising by 0.4% month-over-month and 4.1% year-over-year. These figures surpassed the respective forecasts of 0.3% and 3.9%. The robust wage growth indicates strong demand for labor, which could influence Federal Reserve policy decisions in the coming months.
The positive job growth and wage data come amid concerns about the Federal Reserve's next steps regarding interest rates. Following the report, stock market futures fell, and Treasury yields surged, reflecting market uncertainty about future rate cuts.
Seema Shah, Chief Global Strategist at Principal Asset Management, highlighted the complexity of the situation: "One step forward, two steps back. Today's data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut. Not only has jobs growth exploded again, but wage growth has also surprised to the upside, both moving in the opposite direction to what the Fed needs to begin easing policy."
Revisions to previous months' data showed slight decreases: March's job gains were revised down by 5,000 to 310,000, and April's by 10,000 to 165,000. These adjustments indicate that the overall employment picture is slightly less robust than initially reported.
The U.S. economy's addition of 272,000 jobs in May 2024 exceeded expectations, showcasing the resilience of the labor market despite a rising unemployment rate. With significant job gains in health care, government, and leisure and hospitality, the labor market remains dynamic. However, the accompanying increase in unemployment and steady wage growth add complexity to the economic outlook, particularly in terms of Federal Reserve policy.