U.S. Adds 272,000 Jobs in May, Surpassing Expectations as Unemployment Rate Rises to 4%
TLDR
- The U.S. added 272,000 jobs in May 2024, exceeding the expected 190,000.
- The unemployment rate rose to 4%, the highest since January 2022.
- Job gains were concentrated in health care, government, and leisure and hospitality sectors.
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.
Robust Job Growth in May
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.
Sector-Specific Job Gains
- Health Care: Added 68,000 jobs, continuing its trend of strong growth.
- Government: Increased by 43,000 jobs.
- Leisure and Hospitality: Added 42,000 jobs.
- Professional, Scientific, and Technical Services: Increased by 32,000 jobs.
- Social Assistance: Gained 15,000 jobs.
- Retail: Added 13,000 jobs.
Elizabeth Ann Sonders, Chief Investment Strategist at Charles Schwab, commented on the mixed nature of the report, stating, βOn 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.β
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Unemployment and Earnings Data
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.
Wage Growth
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.
Market and Federal Reserve Implications
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."
Revised Figures
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.
