Jobs Insight

May Jobs Report: Surpassing Expectations but Unemployment Rises, Mixed Bag of Labor Market Trends

As jobs outlook rises, the unemployment rate is rising too.

Published by:

Jason Estabillo

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According to the Bureau of Labor Statistics' monthly employment report, employers added 339,000 jobs in May, surpassing economists' expectations of 190,000 jobs. This represents an acceleration from April's revised job gains of 294,000.

The unemployment rate also rose unexpectedly from 3.4% to 3.7%, which was the largest monthly increase since the early days of the pandemic. The increase in unemployment was driven by people who lost their jobs permanently and those who completed temporary positions. The labor force participation rate remained steady, while the prime age participation rate increased to its highest level since January 2007. The data also suggests that it may be taking longer for people to find work, as the number of people unemployed for 15 to 26 weeks increased by 179,000. Wage growth slightly cooled down in May compared to April.

Overall, the May jobs report was considered a mixed bag, indicating both positive and negative trends in the labor market. The job gains were broad-based, with notable increases in professional and business services, government, health care, leisure and hospitality, construction, and transportation and warehousing.

Despite the mixed data, the US economy has not experienced a month of job losses since December 2020. The job growth in 2023, although lower than in 2021 and 2022, remains elevated compared to pre-pandemic times. The report also highlights efforts by employers to fill employment gaps through expanded outreach and targeting non-traditional applicants.

The interpretation of the jobs report is challenging due to discrepancies between the surveys used to gather employment data. The report's mixed nature further complicates the Federal Reserve's decision-making process regarding interest rates. While it may provide justification for the Fed to maintain its current policy, a resumption of rate hikes in July is seen as a strong possibility if job growth does not significantly slow down in June. The markets anticipate a potential pause in June but expect a rate hike in July.