U.S. employment increased more than expected in May, while the unemployment rate held steady at 3.6 per cent, signs of a tight labour market that could keep the Federal Reserve’s foot on the brake pedal to cool demand.
Nonfarm payrolls increased by 390,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for April was revised higher to show payrolls rising by 436,000 jobs instead of 428,000 as previously estimated.
Economists polled by Reuters had forecast payrolls increasing by 325,000 jobs last month. Estimates ranged from as low as 250,000 jobs added to as high as 477,000.
The report also showed solid wage gains last month, sketching a picture of an economy that continues to expand, although at a moderate pace. The Fed is trying to dampen labour demand to tame inflation, without driving the unemployment rate too high. The U.S. central bank’s hawkish monetary posture and the accompanying tightening of financial conditions have left investors fearful of a recession next year.
Economists are split on whether the moderation in the pace of job growth is because of cooling labour demand or worker shortages. They urge investors to focus on the unemployment rate and wage growth to gauge the tightness of the jobs market. There were 11.4 million job openings at the end of April, with nearly two positions for every unemployed person.
The U.S. central bank has increased its policy interest rate by 75 basis points since March. It is expected to hike the overnight rate by half a percentage point at each of its next meetings this month and in July. Fed vice-chair Lael Brainard said on Thursday she saw little case for pausing in September.
Though the cries of a recession are growing louder, most economists believe the economic expansion will persist through next year. They acknowledged that high inflation was eroding consumers’ purchasing power and business investment, but argued that the economy’s fundamentals were strong and that any downturn would likely be mild.
The economy’s outlook has also been dimmed by a weakening global environment in part because of Russia’s war against Ukraine and China’s zero-COVID policy.
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