The U.S. economy added 390k jobs in May, coming in above the market consensus forecast of 325k. Revisions subtracted a total of 22k jobs from the two prior months. As of May, total payroll employment remains 0.5% below February 2020 levels.
On an industry basis, notable job gains occurred in leisure and hospitality (84k), professional and business services (75k), and in transportation and warehousing (47k). Employment in retail trade pulled back on the month (-61k). Hiring in goods producing (59k) industries was largely concentrated in construction (36k). Government (57k) hiring was also strong in May.
The unemployment rate held steady at 3.6% for the third month in a row, as both the labor force (+330k) and number of people employed (+321k) rose by roughly the same amount. The participation rate ticked up 0.1 percentage points to 62.3%. The participation rate among the 25-54 age group also ticked up (+0.2 percentage points to 82.6%).
Average hourly earnings rose 0.3% month-on-month (m/m), and were up 5.2% on a year-on-year basis – easing slightly from 5.5% y/y in April.
Key Implications
The U.S. economy started off 2022 on strong footing, with payroll gains averaging 540k per month in the first quarter. While the hiring trend has slowed a bit recently, it remains strong near 400k per month, with today’s report playing into that theme. Looking through the details, there were both positive developments, such as the uptick in the labor force participation rate, and less desirable developments, such as a slight deceleration in wage growth. On the whole, however, this was a very solid report.
The U.S. labor market remains on very decent footing – a message echoed by plenty of other labor market indicators. For instance, job openings, which pulled back in April, but remained well north of 11 million, still outnumber unemployed workers by nearly two to one. In this vein, today’s report provides further justification for the Fed to continue to remove monetary stimulus ‘expeditiously’, with at least two more jumbo hikes of 50 basis points in the cards.
The labor market has recovered the bulk of the jobs lost during the pandemic, with payrolls down only 0.5% from February 2020. Meanwhile, the unemployment rate is holding at 3.6% – just a hair above its pre-pandemic low. With the easy gains behind us and the labor market drum tight, we believe that the strong performance at the start of the year is unlikely to be repeated, and that payroll gains are poised to slow further in the quarters ahead.
