US hiring surges past expectations as job market still strong

WASHINGTON, June 7 — US job growth blew past estimates in May even as unemployment edged up, data showed today, underscoring the labour market’s resilience as policymakers seek to cool the economy gradually.

But the hotter than expected figures could complicate the Federal Reserve’s calculus as it weighs the right time to lower interest rates.

It also remains to be seen if positive employment data would translate into rosier perceptions of President Joe Biden, who has been struggling to convince voters of his handling of the economy.

The world’s biggest economy added 272,000 jobs last month, up from a revised 165,000 in April, said the Department of Labour.

This was significantly above the 185,000 increase analysts predicted according to Briefing.com. It was also the highest level since December 2023.

The jobless rate crept up from 3.9 per cent to 4.0 per cent.

But unemployment is still at a relatively low level compared with recent decades, painting a picture of a still-healthy labour market.

Later rate cuts

“The mixed report will complicate the Fed’s job,” said Julia Pollak, chief economist at employment platform ZipRecruiter.

“Fed members and investors had clearly been hoping for a softer report, which would have raised confidence in the appropriateness of a July or September rate cut,” she added.

The US central bank has held rates at a 23-year high in recent months, in hopes of easing demand to rein in inflation sustainably.

With the economy still adding more jobs than anticipated, analysts expect the Fed to hold off rate reductions for longer.

A hot labour market could “help keep inflation more buoyant and delay Fed rate cuts to later this year or into next year,” cautioned Nationwide chief economist Kathy Bostjancic.

‘Steady expansion’

In May, sectors like health care and government, as well as leisure and hospitality, saw employment continuing to trend up, the Labour Department said.

While average hourly earnings rose by 0.4 per cent month-on-month, the year-on-year increase of 4.1 per cent remains similar to the level in recent months.

“A strong job market with persistently high wage growth was not what investors had hoped for,” Pollak added.

But “the report is good news for workers still seeking jobs, and stronger wage gains benefit Americans scrambling to deal with high inflation,” noted Robert Frick, corporate economist at the Navy Federal Credit Union.

“The report bodes well for the economy continuing its steady expansion through this year,” he said.

A robust labour market has allowed consumers to keep spending even in the face of elevated interest rates — giving the economy a boost.

Futures traders widely expect officials to hold rates steady until around September, according to CME Group’s FedWatch Tool.

The Fed’s next policy meeting takes place on Tuesday and Wednesday. — AFP