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Employers added 272,000 jobs last month, the Labor Department reported Friday, well above what economists had expected as hiring had gradually slowed. That was up from an average of 232,000 jobs in the previous 12 months, muddying the picture of an economy easing into a more sustainable pace.
Most worrying for the Federal Reserve, which meets next week and 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 would see a rate cut in July, that door has largely been closed,” said Beth Ann Bovino, chief U.S. economist at US Bank. While wage increases are good for workers, she noted, persistent price increases undermine their spending power.
Shares fell shortly after the report was released, before regaining ground and trading slightly higher. Treasury yields, which track expectations for Fed rate moves, rose sharply and remained elevated throughout the trading day.
But even the picture of an accelerating job market is not entirely clear. Elsewhere in the report, the unemployment rate rose to 4%, the highest point since January 2022. This number is taken from a household survey, which showed essentially no job growth over the past year and an increase of part-time employment, which has seen growth in part-time employment displace full-time positions.
Employer data that generate job growth numbers tend to be more reliable, but the household survey has recently been more consistent with other indicators. Retail sales have flattened. Gross domestic product fell significantly in the first quarter. The number of job openings 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.
“Other than 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 retreating a lot and we expect disposable income to be affected as well.”
Health care was the backbone of hiring for two and a half years, accounting for 18.6% of 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.
It’s already evident to Peter Finch, the superintendent of the West Valley School District, outside Yakima, Wash. Funding from the American Rescue Plan Act allowed him to add staffers like mental health counselors and tutors, but now he’s no longer filling positions because people are leaving.
“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 steady 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.
A positive sign concerns the labor force: the percentage of people between 25 and 54 who are working or looking for work reached the highest level since the beginning of 2002, equal to 83.6%. In this age group, women lead the way, reaching the highest participation rate ever recorded in May.
The picture isn’t as rosy for adults in their early 20s, whose participation rate fell in May. As employers hang on to their workers and fewer are leaving voluntarily, there’s less room for those with little work experience, who find work 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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