U.S. hiring accelerated in May as employers added a booming 339,000 jobs and the labor market continued to shrug off high interest rates and persistent inflation.
The unemployment rate rose from a five-decade low of 3.4% to 3.7%, the Labor Department said Friday.
Economists surveyed by Bloomberg had estimated that 195,000 jobs were added last month.
The job market has been remarkably sturdy despite the Federal Reserve’s aggressive interest rate hikes aimed at tamping down hiring and wage growth, and wrestling down inflation.
Fed officials have said they could pause the rate increases at a meeting this month but a booming May jobs report and more worrisome data on inflation could scuttle that plan.
Job growth generally has slowed in recent months as interest rates have climbed and recession fears have grown but the numbers have been volatile. Companies frustrated by pandemic-related worker shortages continue to snap up workers and minimize layoffs.
Employers posted a historically high 10.1 million job openings in April, up from 9.7 million the prior month and reversing a recent slowing trend, Labor said this week. At the same time, the number of people quitting jobs fell to the lowest level in two years in a sign that workers are less confident they can switch jobs to notch big pay increases, a positive development from the Fed’s perspective.
Homebase, which makes employee scheduling software for small businesses, said wages fell last month for the first time since 2021.
While worker shortages continue to bedevil employers, they have been easing across most of the U.S. as Americans sidelined by the pandemic filter back into the work force. But businesses still struggling to find employees typically bring them on early in the year ahead of the spring hiring season, leaving a smaller labor supply that was likely to dampen May’s job growth, Goldman Sachs says.
Hiring then tends to rebound in June as high school and college students seek summer jobs, the research firm says.
Another factor weighing on May’s payroll gains were stricter bank lending standards in the wake of the collapse of several regional banks plagued by deposit runs. Industries such as restaurants and hotels rely on credit to pay workers. The tougher loan criteria likely reduced job growth by about 25,000, Goldman estimates.
