U.S. job growth surged in May and wages accelerated, prompting traders to push back the expected timing of Federal Reserve interest-rate cuts.
Nonfarm payrolls advanced 272,000 last month, a Bureau of Labor Statistics report showed Friday, and average hourly earnings climbed 0.4% from April and 4.1% from a year ago, both picking up from the prior report.
However, the unemployment rate — which is derived from a separate survey — increased to 4% from 3.9%, rising to that level for the first time in over two years.
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The latest figures highlight a labor market that continues to defy expectations and blunt the impact on the economy from high interest rates and prices. That strength risks keeping inflationary pressures stubborn, which will likely reinforce the Fed's cautious stance on monetary policy as officials debate
"It's a very Fed-unfriendly report — an easing-unfriendly report," said Jay Bryson, Wells Fargo chief economist. "Taking this piece of data by itself means the Fed is likely to remain on hold for the next several months."
This is one of the last major reports Fed officials will see before next week's meeting, when they're widely forecast to keep borrowing costs at a two-decade high. A closely watched inflation report will be released on the morning of their Wednesday decision.
Economists will be especially attuned to updated quarterly projections after inflation and employment mostly surprised to the upside at the start of the year. Officials aren't expected to cut rates until the end of 2024 at the earliest, even as their Group of Seven peers in
President Joe Biden has routinely touted the strength of the labor market in his campaign for reelection, noting how the unemployment rate had held below 4% for over two years. The unexpected rise represents another hurdle for his administration as voters have largely been downbeat on the economy and burdened by persistent inflation.
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"We have historic job growth, low levels of unemployment," Julie Su, acting labor secretary, said on Bloomberg Television. "I think it is the very definition of a soft landing."
The participation rate — the share of the population that is working or looking for work — fell to 62.5%, matching the lowest since early last year. The rate for workers ages 25-54, however, rose to the highest since 2002.
Job growth in May was fairly broad, led by healthcare, government and leisure and hospitality. Professional and business services added the most jobs since the start of the year.
Data out Wednesday from the BLS
In Friday's report, aggregate weekly payrolls — a broad measure of employment, hours and earnings — advanced 0.6% after stalling in April. Wage growth for production and nonsupervisory employees, which covers the majority of workers, was also robust — up 0.47% from a month earlier, the most since March of last year.
