The U.S. labor market delivered solid job growth in May, the Labor Department reported Friday, even as the unemployment rate rose.
The unexpectedly strong hiring shows that employers remain undaunted, despite the pressure of high interest rates and slowing consumer spending. But there were some mixed signals in the report, with results from a household survey showing a weaker picture than from a business survey.
Here’s what you should know:
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Services boosted profits: Overall, U.S. employers added 272,000 jobs last month, with health care again accounting for the biggest growth, adding 68,000 jobs. Public procurement has recovered since April, with 43,000 additional jobs, as has leisure and hospitality work, with 42,000.
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Salaries were strong: Average hourly earnings increased 0.4 percent, or 4.1 percent, from a year earlier. This was also stronger than expected, as wage increases have been declining since early 2022. Wage growth is not the main reason inflation has been high, but economists worry it will be difficult to fully control inflation if wages continue to rise at their recent pace.
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But the unemployment rate increased: The unemployment rate hit 4 percent for the first time since January 2022, ending one of the longest streaks of unemployment below 4 percent on record.
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A contradictory message: The household survey, from which the unemployment rate is extracted, showed warning signs, showing that 408,000 fewer people were working in May than in April. That data has been out of step for some time with the employer survey, from which the job growth figure is calculated, suggesting revisions in the future.
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What it means for the Federal Reserve: The report was not what Federal Reserve officials expected: They would like to see a slowdown in job and wage growth and continued low unemployment. Instead, the report showed an acceleration in job and wage growth and a rise in unemployment. Ultimately, the data is unlikely to affect the Fed’s interest rate decision next week, when most economists expect policymakers to leave rates unchanged.
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What it means for the White House: The headline employment figure is cause for celebration for President Biden: “During my term, 15.6 million more Americans have the dignity and respect that comes with a job,” he said in a statement. But Biden is trailing in the polls, possibly indicating that Americans care more about high prices than abundant jobs.
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How the markets reacted: Stocks held steady and government bond yields rose sharply as the report raised concerns that the gradual decline in inflation could still stall. That has led investors to reduce their bets on the Federal Reserve cutting interest rates in the near future, implying that historically high rates will continue to weigh on the economy for many months to come.