U.S. Labor Market Shows Continued Resilience

June 2, 2023

A springtime surge in hiring is the latest sign that the U.S. economy is maintaining momentum, even in the face of rising interest rates, which complicates the Federal Reserve’s thinking on whether to pause rate increases later this month.

U.S. employers added a seasonally adjusted 339,000 jobs in May, the largest increase since January. The numbers are much higher than the 190,000 that economists from Dow Jones had been expecting.

In addition to the month’s strong gains, the past two months’ job numbers were upwardly revised by nearly 100,000, the Labor Department announced. The economy has added more than 1.5 million jobs in 2023. This marks the 29th consecutive month of positive job growth.

The report did offer some evidence of softening in the labor market. While still historically low, the unemployment rate jumped from 3.4% in April to 3.7%, the highest level since October. 

Average hourly earnings, a closely watched inflation indicator for the Fed, rose 0.3% for the month, which was in line with expectations. On an annual basis, wages increased by 4.3%, which was 0.1% below the estimate.

The labor-force participation rate, which reflects the portion of the American populace who are working or actively seeking jobs, remained flat in May at 62.6% and below the February 2020 pre-pandemic level of 63.3%. That is largely due to the aging U.S. population. Among workers aged 25 to 54, the participation rate rose to 83.4%, the highest level since 2007.

The latest report does little to settle the debate over whether the Fed will hold interest rates steady at its meeting later this month. Following the report’s release, traders briefly priced in about a 38% chance of another quarter-point increase in June, but the probability fell back to about 26% later in the day, according to CME Group data.

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