The U.S. labor market again defied expectations in May as employers added 172,000 jobs, marking the third consecutive month of gains, the Bureau of Labor Statistics reported Friday.
The unemployment rate held steady at 4.3%. While the number of people experiencing short-term unemployment declined, the share of Americans in long-term unemployment — defined as being out of work for at least 27 weeks — increased.
Average hourly wages rose 3.4% from a year earlier, but pay gains continued to lag behind inflation.
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Revised figures showed the economy added 185,000 jobs in April and 214,000 in March. Over the past decade, monthly job growth has averaged about 124,000.
Leisure and hospitality, local government, and health care posted the largest gains in May.
A separate report from payroll processor ADP estimated the private sector added 122,000 jobs in May. That figure does not include government positions, which BLS data show increased by 55,000 last month.
“Hiring was more broad-based in May than we’ve seen in the last few years,” said Nela Richardson, chief economist at ADP. “The labor market continues to show sustained momentum going into the summer hiring season.”
Indeed director of economic research Laura Ullrich said the latest numbers were about three times higher than what was expected.
"The numbers may be even better than they look, given that many economists have determined the monthly breakeven rate – the number of jobs that need to be added to keep unemployment steady – has fallen to a much lower level. But the headline continues to obscure the same underlying story we've been telling for months: This is still a low-hire, low-fire market, and the calm on the surface reflects stillness underneath, rather than genuine momentum," she said.
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The combination of solid job growth and elevated inflation makes interest rate cuts unlikely in the near term. The data also raise the possibility the Federal Reserve could raise rates to help cool inflation.
However, new Fed Chair Kevin Warsh has advocated for cutting rates more aggressively than his predecessor, Jerome Powell, who remains on the board as a governor.
