U.S. job growth accelerated again in May, defying expectations for a slowdown, even as the unemployment rate rose to the highest level in more than two years.
Employers added 272,000 jobs in May, the Labor Department said in its monthly payroll report released Friday, easily topping the 185,000 gain forecast by LSEG economists. But the unemployment rate unexpectedly inched higher to 4% against expectations that it would hold steady at 3.9%.
It marked the highest level for the jobless rate since January 2022.
Wage growth also remained strong last month, with average hourly earnings — a key measure of inflation — rising 0.4%, more than expected. On an annual basis, wages increased 4.1% in May
Markets have been closely watching the report for evidence the labor market is continuing to soften after months of solid job gains as Federal Reserve policymakers weigh when to start cutting interest rates. Although inflation has fallen sharply from a peak of 9.1%, progress has cooled sharply since the summer.
Officials have signaled they are in no rush to cut, and that incoming economic data will guide their decision.
“One step forward, two steps back,” said Seema Shah, chief global strategist at Principal Asset Management. “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. “
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Health care continued to lead the way in job creation, onboarding 68,000 new workers in May. Other sectors showing notable growth included the government (43,000), leisure and hospitality (42,000), and professional, scientific and technical services (32,000).
The report also showed modest revisions to job gains earlier this year. Gains for March were revised down by a total of 5,000 jobs to 310,000, the government said, while April’s gain also came in slightly lower at 165,000 jobs.
This is a developing story. Please check back for updates.
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