In May, the U.S. economy saw a strong job growth of 272,000, exceeding expectations and indicating employer confidence despite high interest rates. This marked a significant increase from the previous month, where 165,000 jobs were added. However, the unemployment rate also rose slightly to 4% from 3.9% in April, ending a 27-month streak of unemployment below 4%.
Job gains were seen across various sectors, with the healthcare sector adding 68,000 jobs, government employment increasing by 43,000 jobs, and the leisure and hospitality sector adding 42,000 jobs. While there were signs of potential economic slowdown, such as a slip in the labor force participation rate, participation among prime-age workers rose to its highest level in 22 years.
Wage growth also accelerated in May, with wages rising 4.1% from a year ago, exceeding the inflation rate. This could potentially lead to persistent inflation if companies start raising their prices to offset higher wage costs. The Federal Reserve is closely monitoring these developments as it considers when to begin cutting its benchmark interest rate. Most economists do not expect any Fed rate reductions before September at the earliest.