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Employers created 272,000 jobs last month, the Labor Department reported Friday, well above what economists had expected as hiring had gradually slowed. That’s an increase from the average of 232,000 jobs over the previous 12 months, muddying the picture of an economy that is relaxing to a more sustainable pace.
Most worrying for the Federal Reserve, which meets next week and then again in July, is that wages rose 4.1% from a year ago, a sign that inflation may not yet be defeated.
“For those who thought they were going to see a rate cut in July, that door has largely been closed,” said Beth Ann Bovino, chief U.S. economist at U.S. Bank. While wage increases are good for workers, she noted, persistent price increases are sapping their spending power.
Stocks fell shortly after the report, before recovering to trade slightly higher. Treasury yields, which track expectations for Fed rate moves, rose sharply and remained elevated throughout the trading day.
But the picture of an accelerating labor market is also not entirely clear. Elsewhere in the report, the unemployment rate rose to 4%, its highest point since January 2022. That number is from a household survey, which showed essentially no job growth over the past year and an increase in part-time employment, with part-time job growth displacing full-time positions.
Employer data that generates job growth numbers tends to be more reliable, but the household survey has recently been more consistent with other indicators. Retail sales flattened. Gross domestic product fell significantly in the first quarter. The number of job offers is at its lowest level since 2021.
That’s why most economists expect job growth to continue to slow and the unemployment rate to rise further this year.
“Aside from healthcare, we don’t see much strength in the data,” said Parul Jain, chief investment strategist at MacroFin Analytics. “Growth in 2024 is unlikely to be very strong, consumers are pulling back significantly and we expect disposable income to be affected as well.”
Health care has been the backbone of hiring for two and a half years, accounting for 18.6% of the jobs added. An aging population has spurred demand, and increased insurance coverage through the Affordable Care Act has given more people access to care.
On the other hand, leisure and hospitality, which was hit harder than any other sector by the Covid-19 lockdowns, took until April to regain its February 2020 employment level. A season’s forecast record summer travel could push that number higher in the coming months, though few expect job growth to surpass last year’s numbers.
United Airlines, for example, announced this week that it expects to add 10,000 jobs this year, up from 16,000 in 2023 and 15,000 the year before, as pandemic recovery transforms into organic growth.
One reason job growth beat forecasts was public employment, which recovered quickly but was expected to collapse as federal pandemic relief funds ran out. Instead, the sector added 43,000 jobs in May. But a slowdown could still be in the offing.
This is already evident to Peter Finch, the superintendent of the West Valley School District, which is located outside Yakima, Washington. Funding in the American Rescue Plan Act had allowed him to add staff members such as mental health counselors and tutors, but now he is unable to fill positions as people leave.
“It’s a tough time for education,” Dr. Finch said. “If you have fewer resources, you can’t provide the same services you used to — that’s the reality.”
The labor market’s impressive run has been fueled by both a resurgence in legal immigration and an influx of millions of migrants with temporary status, many of whom have found work with the help of expedited work permits. Hiring has fallen sharply for native-born workers but has held up for foreign-born workers, according to calculations by the W.E. Upjohn Institute for Employment Research.
That impact could also wane as President Biden’s executive order restricting asylum seekers’ access to the southern border goes into effect.
One positive sign is in the labor force: the percentage of people between the ages of 25 and 54 who are working or looking for work reached 83.6%, its highest level since early 2002. Women in that age group led the way, reaching their highest participation rate ever in May.
The picture isn’t so rosy for adults in their 20s, whose participation rate fell in May. As employers cling to their workers and fewer are leaving voluntarily, there’s less room for those with little work experience, who find jobs at lower rates.
Even workers over 55 have not returned to the workforce in large numbers: their participation rate remains two percentage points lower than pre-pandemic. But some were turned away because costs rose and pension funds were unable to cover them.
Take John Refoy, 67, who retired from the Navy after 33 years as a maintenance technician.
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