Job growth in the US economy was surprisingly strong in May 2024, with the addition of 272,000 jobs, according to the Bureau of Labor Statistics. This number exceeded all 77 forecasts compiled by Bloomberg and is a significant increase from the average monthly gain of 232,000 over the last 12 months.
The service sector saw significant job gains, particularly in health care and social assistance, with an addition of 68,000 and 43,000 jobs respectively. The professional, scientific and technical services sector also added 32,000 jobs during the month. These sectors accounted for more than half of the month's total gains.
On the other hand, social assistance employment trended higher with an addition of 15,000 last month, below the sector's average of 22,000 jobs per month seen over the last year. Job losses occurred in department stores and furniture and home furnishings retailers.
The labor market data showed conflicting signals. While the establishment survey suggested that employers added a whopping 272,000 jobs last month, the household survey showed a rise in the unemployment rate to 4.1% from 3.9% in April.
Average hourly earnings increased by 0.4%, indicating that workers are getting paid more for their work. However, this increase may also contribute to inflationary pressures, which could impact the Federal Reserve's interest rate decisions.
The Federal Reserve is under pressure to cut interest rates in response to signs of a broader economic slowdown. However, the strong job growth and above-average wage growth paint a picture of a fairly strong consumer, making it less likely for the Fed to cut rates in June.
Economists are divided on the implications of this data. Some see it as a positive sign of a robust labor market, while others warn that it could lead to higher inflation and interest rates.
Dean Baker, an economist who co-founded the Center for Economic and Policy Research, told CNN that “We're seeing a lot of job growth, that's a generally good story.” However, he added that “But the Fed's going 'Oh, can we cut [interest rates]? Can we cut?'” indicating that the Fed may face pressure to raise interest rates in response to the strong job growth.
In conclusion, while the job growth numbers are impressive, they also highlight the challenges facing the Federal Reserve as it tries to balance the need for economic stimulus with concerns about inflation and interest rates.
