Employers in the United States added 272,000 workers to their payrolls in May, the Department of Labor announced Friday, likely eliminating the chances for a rate cut from the Federal Reserve early this summer.
Economists had predicted payrolls would increase by 182,000 and that the unemployment rate would remain steady at the prior month’s 3.9 percent, as per Econoday.
The private sector saw an addition of 229,000 jobs, up from 158,000 the previous month. The goods-producing side of the economy added 25,000 positions, including 21,000 in construction and 8,000 in manufacturing.
The services segment of the private sector added 204,000 jobs, with gains spread across wholesale trade, retail trade, transportation and utilities, financial services, business services, leisure and hospitality, education, and healthcare.
The public sector contributed 43,000 new jobs.
The stronger-than-expected employment numbers likely delay hopes for rate cuts until late this year or into next year.
The April estimate was revised down by 10,000 to 165,000 and the March estimate by 5,000 to 310,000.
Last December, the Federal Reserve indicated it was probably done with hiking interest rates, and officials projected cutting rates three times in 2024. Prices in bond and derivatives markets suggested the Fed would cut rates by up to six times starting with the March meeting. However, after the Fed signaled in January that it would not be ready to cut rates in March, many investors adjusted their expectations to believe cuts would begin at the May meeting.
The Fed typically lowers rates when the economy appears to be weakening. Although growth was robust last year, particularly in the second half, economists anticipated that the rate hikes from March 2022 through July 2023 would significantly hinder growth and the labor market this year. Growth slowed to a 1.3 percent pace in the first quarter of this year.
Some Democrat politicians, progressive economists, and Wall Street analysts argue that the Fed risks triggering an unnecessary recession by delaying rate cuts. Fed officials, including chairman Jerome Powell, maintain that the strength of the labor market and overall economy allows them to be patient.
