Employers created 272,000 jobs last month, the Labor Department reported Friday, well above what economists had expected as hiring gradually slowed. That’s an increase from the average of 232,000 jobs over the previous 12 months, muddying the picture of an economy that is relaxing to a more sustainable pace.
Most worrying for the Federal Reserve, which meets next week and again in July, is that wages rose 4.1% from a year ago, a sign that inflation may not yet be defeated.
“For those who thought they would see a rate cut in July, that door has largely been closed,” said Beth Ann Bovino, chief U.S. economist at US Bank. While wage increases are good for workers, she noted, persistent price increases undermine their spending power.
Stocks fell shortly after the report, before recovering to trade slightly higher. Treasury yields, which track expectations for Fed rate moves, rose sharply and remained elevated throughout the trading day.
But the picture of an accelerating labor market is also not entirely clear. Elsewhere in the report, the unemployment rate rose to 4%, its highest point since January 2022. That number is from a household survey, which showed essentially no job growth over the past year and an increase in part-time employment, with part-time job growth displacing full-time positions.
Employer data that generates job growth numbers tends to be more reliable, but the household survey has recently been more consistent with other indicators. Retail sales have flattened. Gross domestic product fell significantly in the first quarter. The number of job openings is at its lowest level since 2021.
That’s why most economists expect job growth to continue to slow and the unemployment rate to rise further this year.
“Aside from healthcare, we don’t see much strength in the data,” said Parul Jain, chief investment strategist at MacroFin Analytics. “Growth in 2024 is unlikely to be very strong, consumers are retiring a lot and we expect disposable income to be impacted as well.”
Health care was the backbone of hiring for two and a half years, accounting for 18.6% of jobs added. An aging population has spurred demand, and increased insurance coverage through the Affordable Care Act has given more people access to care.
On the other hand, leisure and hospitality – which were hit harder than any other sector by the Covid-19 lockdowns – took until April to regain the employment level of February 2020. Predictions of a record season of Summer travel could push this number higher in coming years. months, although few expect job growth to surpass last year’s numbers.
United Airlines, for example, announced this week that it expects to add 10,000 jobs this year, up from 16,000 in 2023 and 15,000 the year before, as pandemic recovery transforms into organic growth.
One reason job growth beat forecasts was government employment, which recovered quickly but was expected to collapse as federal pandemic relief funds ran out. The sector instead added 43,000 jobs in May. But a slowdown may still be in sight.
This is already evident to Peter Finch, the superintendent of the West Valley School District, which is located outside Yakima, Washington. Funding in the American Rescue Plan Act had allowed him to add staff members such as mental health counselors and tutors, but now he is unable to fill positions as people leave.
“It’s a challenging time for education,” Dr. Finch said. “If you have fewer resources, you can’t provide the same services you had in the past — that’s the reality.”
The impressive labor market run has been fueled by both a resurgence in legal immigration and an influx of millions of migrants with temporary status, many of whom have found jobs with the help of fast-track work permits. According to calculations from the WE Upjohn Institute for Employment Research, hiring fell sharply for native-born workers but remained stable for foreign-born workers.
That impact may also fade as President Biden’s executive order restricting asylum seekers at the southern border goes into effect.
A positive sign concerns the workforce: the percentage of people between 25 and 54 years old who work or are looking for work has reached the highest level since the beginning of 2002, equal to 83.6%. In this age group, women excel, who in May reached the highest participation rate ever recorded.
The picture isn’t as rosy for adults in their early 20s, whose participation rate fell in May. As employers hang on to their employees and fewer voluntarily leave, there is less room for those with little work experience, who find work at lower rates.
Even workers over 55 have not returned to the workforce in large numbers: their participation rate remains two percentage points lower than pre-pandemic. But some were turned away because costs rose and pension funds were unable to cover them.
Take John Refoy, 67, who retired from the Navy after 33 years as a maintenance technician.
