(WBAP/KLIF) — WASHINGTON (AP) — America’s employers added a strong 272,000 jobs in May, accelerating from April and a sign that companies are still confident enough in the economy to keep hiring despite persistently high interest rates.
Last month’s sizable job gain suggests that the economy is still growing steadily, propelled by consumer spending on travel, entertainment and other services. U.S. airports, for example, reported near-record traffic over the Memorial Day weekend. A healthy job market typically drives consumer spending, the economy’s principal fuel. Though some recent signs had raised concerns about economic weakness, May’s jobs report should help assuage those fears.
Even so, Friday’s report from the government included some signs of a potential slowdown. The unemployment rate, for example, edged up for a second straight month, to a still-low 4%, from 3.9%, ending a 27-month streak of unemployment below 4%. That streak had matched the longest such run since the late 1960s.
President Joe Biden pointed to Friday’s jobs report as a sign of the economy’s robust health under his administration. He also charged that congressional Republicans would worsen inflation by cutting health care subsidies and widening the deficit through tax cuts.
The presumptive Republican nominee, Donald Trump, has focused his criticism of Biden’s economic policies on the surge in inflation, which polls show still weighs heavily in voters’ assessment of the economy. At a rally in Phoenix on Thursday, he blamed illegal immigration for contributing to higher prices.
Economists say the mixed signals from Friday’s report — a surge in jobs alongside a slight rise in unemployment — are likely a sign that the job market is normalizing after years of distortions related to the pandemic. After the brutal pandemic recession, when unemployment rocketed to nearly 15%, hiring soared in 2022 and 2023 as the economy quickly recovered. Wages, before adjusting for inflation, also jumped as businesses desperately sought to fill jobs.
“Employment growth is continuing at a solid pace, but there are ample signs that the heat in the labor market over the past few years largely has been removed,” said Sarah House, an economist at Wells Fargo.
The number of open jobs, while still elevated, has fallen to a three-year low, the government said this week. Fewer workers are quitting their jobs, after quits had soared after the pandemic. Many employers say it’s become easier to find workers to fill their open jobs.
But after months of cooling, growth in hourly paychecks accelerated last month, a welcome gain for workers, but one that could contribute to stickier inflation. Hourly wages rose 4.1% from a year ago, faster than the rate of inflation and more quickly than in April. Some companies may raise their prices to offset their higher wage costs.
The Federal Reserve’s inflation fighters would like to see the economy cool a bit as they consider when to begin cutting their benchmark rate. The Fed sharply raised interest rates in 2022 and 2023 after the vigorous recovery from the pandemic recession ignited the worst inflation in 40 years.
Friday’s report will likely underscore Fed officials’ intention to delay any cuts to their benchmark interest rate while they monitor inflation and economic data. Most economists expect no Fed rate reductions before September at the earliest. Once the cuts do begin, lower rates on many consumer and business loans, including for mortgages and autos, should follow.
Though Chair Jerome Powell has said he expects inflation to continue to ease, he has stressed that the Fed’s policymakers need “greater confidence” that inflation will fall back to their 2% target before they would reduce borrowing costs. Annual inflation has declined to 2.7% by the Fed’s preferred measure, from a peak above 7% in 2022.
“This report is going to complicate the Fed’s job,” said Julia Pollak, chief economist for ZipRecruiter. “No one’s getting those very clear signals that they were hoping for that a rate cut is appropriate in July or September.”
Last month’s hiring occurred broadly across most of the economy. But job gains were particularly robust in health care, which added 84,000, and restaurants, hotels, and entertainment providers, which gained 42,000.
Governments, particularly local governments, added 43,000 positions. Professional and business services, which includes managers, architects and information technology, grew by 33,000.
One potential sign of weakness in the May employment report was a drop in the proportion of Americans who either have a job or are looking for one; it fell from 62.7% to 62.5%. Most of that drop occurred among people 55 and over, many of whom are baby boomers who are retiring.
A surge in immigration in the past three years has boosted the size of the U.S. workforce and has been a key driver of the healthy pace of job growth. (Economists have said it isn’t clear whether the government’s jobs report is picking up all those gains, particularly among unauthorized immigrants.)
The economy expanded at just a 1.3% annual rate in the first three months of this year, the government said last week, a sharp pullback from the 3.4% pace in last year’s final quarter. Much of the slowdown, though, reflected reduced stockpiling by businesses and other volatile factors, while consumer and business spending made clear that demand remained solid.
In April, though, consumer spending, adjusted for inflation, declined. That raised concern among economists that elevated inflation and interest rates are increasingly pressuring some consumers, particularly younger and lower-income households.
A key reason why the economy is still producing solid net job growth is that layoffs remain at historic lows. Just 1.5 million people lost jobs in April. That’s the lowest monthly figure on record — outside of the peak pandemic period — in data going back 24 years. After struggling to fill jobs for several years, most employers are reluctant to lay off workers.
(Copyright 2024 WBAP/KLIF Newsroom News. All rights reserved. Contains material from the Associated Press.)
