With debt-ceiling concerns now dissipating and the risk of banking troubles weighing on the economy appearing to be receding, the Fed will remain focused on still-excessive inflation and a far stronger labor market than it had hoped.
The rhetoric that has been echoing over the U.S. job market is that the sun will soon no longer shine, just wait and see.
But for now, the sun is still shining. The U.S. Labor Department reported Friday that nonfarm payrolls rose by a seasonally adjusted 339,000 last month, well above what economists surveyed by The Wall Street Journal had expected. Added 190,000. In addition, the already strong payroll figures for March and April were revised upwards by a combined 93,000.
The unemployment rate rose to 3.7% from an ultra-low 3.4% in April, but it was hard to see that as evidence that the job market was slowing. The nonfarm payrolls figure is based on a survey of employers, while the unemployment rate is based on a separate survey of households, which has a relatively small sample size. Employment data based on such household surveys tend to be more volatile, and the decline in May was dragged down by areas not covered by the aforementioned employer surveys, such as those who said they were self-employed or working in private households. person. Excluding these, the household survey-based measure showed a shift from a loss of 310,000 jobs to a gain of 394,000.
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The rhetoric that has been echoing over the U.S. job market is that the sun will soon no longer shine, just wait and see.
But for now, the sun is still shining. The U.S. Labor Department reported Friday that nonfarm payrolls rose by a seasonally adjusted 339,000 last month, well above what economists surveyed by The Wall Street Journal had expected. Added 190,000. In addition, the already impressive payroll figures for March and April were revised upwards by a combined 93,000.
The unemployment rate rose to 3.7% from an ultra-low 3.4% in April, but it was hard to see that as evidence that the job market was slowing. The nonfarm payrolls figure is based on a survey of employers, while the unemployment rate is based on a separate survey of households, which has a relatively small sample size. Employment data based on such household surveys tend to be more volatile, and the decline in May was dragged down by areas not covered by the aforementioned employer surveys, such as those who said they were self-employed or working in private households. person. Excluding these, the household survey-based measure showed a shift from a loss of 310,000 jobs to a gain of 394,000.
Meanwhile, the increase in overall nonfarm payrolls was driven by gains in the services sector; staffing levels in services appear to remain below pre-pandemic norms. Leisure and hospitality added 48,000 jobs, while healthcare added 52,400. Employment momentum in goods-producing sectors held up fairly well: manufacturing jobs fell by a small 2,000 jobs, while construction added 25,000.
One message from the report is that the banking woes sparked by the collapse of Silicon Valley Bank in March still appear to have had little impact on the job market. While the decline in the self-employed group may indicate that it is more difficult for people to get loans to start their businesses, institutional employers do not appear to be cutting staff.
In addition, before the report was released, some forecasters believed that some temporary factors may suppress the May data. Economists at Goldman Sachs, for example, reckon companies that ramp up their workforces over the summer will struggle to hire because the labor market is tight and many young people are still in school. Economists at Morgan Stanley see factors the Labor Department uses to smooth out seasonal fluctuations as a drag on the May jobs number. Despite these hurdles, the May jobs report showed such strong growth and suggested the June report could be very strong as well.
For their part, policymakers at the U.S. Federal Reserve, which may find some excuse in the aforementioned rise in unemployment, still look likely to keep rates on hold when they meet later this month. But with debt ceiling concerns now dissipating and the risk of banking troubles weighing on the economy appearing to be receding, the Fed will remain focused on still-excessive inflation and a far stronger labor market than it had hoped. By July, policymakers are likely to raise rates again.
The job market hasn’t taken a hit yet, but that doesn’t mean the Fed can’t do it.