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US Hiring Heats Up Unexpectedly in May But Wage Gains Ease

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By Beiyi Seow

Hiring in the United States heated up again in May, according to government data released Friday, with the strong labor market defying expectations of a slowdown amid efforts to cool the world’s biggest economy. news online

The jobs market has been surprisingly robust even as regulators have worked to ease demand and tamp down inflation, with the central bank lifting interest rates 10 times since early last year.

While the expectation has been that higher rates will slow the economy, with elevated borrowing costs making it pricier to borrow funds for major purchases or business expansion, the latest numbers could prove challenging for policymakers mulling a pause in rate hikes.

The United States added 339,000 jobs last month, surpassing estimates and picking up from a revised 294,000 figure in April, the Labor Department said Friday.

The jobless rate ticked up to 3.7 percent, rising from a historically low level of 3.4 percent.

But in a more welcome sign, wage gains moderated slightly with average hourly earnings up by 0.3 percent, slightly down from 0.4 percent in April, the report said.

“Today is a good day for the American economy and American workers,” President Joe Biden said in a statement.

He added that the jobless rate has been below four percent for 16 straight months, noting the long stretch of low unemployment.

Wage stress “not building”

“The data show that job growth is continuing at a rapid pace, but wage pressures are not building,” said Rubeela Farooqi, chief US economist at High Frequency Economics.

Compared with a year ago, average hourly earnings were up 4.3 percent, said the Labor Department.

Although hiring and unemployment both rose in the latest report, analysts said that the pick up in the jobless rate was not due to an increase in the labor force participation rate.

The difference comes as the Labor Department uses two separate surveys each month to compile its “employment situation summary” — with the unemployment rate calculated from a household survey and job gains or losses coming from an establishment survey.

“The two surveys can diverge quite substantially but over time they tend to signal the same thing,” Farooqi told AFP.

Nationwide chief economist Kathy Bostjancic added that “looking at a three-month moving average of both shows less of a gap.”

Room for pause

Sectors that saw job gains last month included professional and business services, health care and construction, said the Labor Department report.

But although the employment numbers were well above what analysts expected, Farooqi believes the wage data could still give the Federal Reserve room to hold policy steady.

Fed policymakers are set to convene in mid-June, and some senior central bank officials have indicated this week that they might support skipping a further hike at their upcoming meeting.

A key factor is that officials are eyeing the lagged effects of existing rate hikes as they ripple through the economy while deciding if more action is needed.

A particular area of concern is that strong demand for workers and continued wage growth could feed into inflation. But if wage gains are not rising, this could ease pressure on policymakers.

“Several Federal Reserve officials have signaled that they are likely to hold rates steady at their upcoming June meeting but are unlikely to reduce rates anytime soon,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association.

“This somewhat mixed jobs report is likely to support that approach,” he added.


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Employment Situation Summary May 2023

Total nonfarm payroll employment increased by 339,000 in May, and the unemployment
rate rose by 0.3 percentage point to 3.7 percent, the U.S. Bureau of Labor Statistics
reported today. Job gains occurred in professional and business services, government,
health care, construction, transportation and warehousing, and social assistance.

This news release presents statistics from two monthly surveys. The household survey
measures labor force status, including unemployment, by demographic characteristics.
The establishment survey measures nonfarm employment, hours, and earnings by industry.
For more information about the concepts and statistical methodology used in these two
surveys, see the Technical Note.

Household Survey Data

The unemployment rate increased by 0.3 percentage point to 3.7 percent in May, and
the number of unemployed persons rose by 440,000 to 6.1 million. The unemployment
rate has ranged from 3.4 percent to 3.7 percent since March 2022. (See table A-1.)

Among the major worker groups, the unemployment rates for adult women (3.3 percent)
and Blacks (5.6 percent) rose in May. The jobless rates for adult men (3.5 percent),
teenagers (10.3 percent), Whites (3.3 percent), Asians (2.9 percent), and Hispanics
(4.0 percent) showed little change over the month. (See tables A-1, A-2, and A-3.)

The number of job losers and persons who completed temporary jobs increased by
318,000 to 3.0 million in May, offsetting a decrease in the previous month.
(See table A-11.)

In May, the number of persons jobless less than 5 weeks edged up by 217,000 to
2.1 million, partially offsetting a decrease in the prior month. The number of
persons jobless 15 to 26 weeks increased by 179,000 to 858,000 in May. The number
of long-term unemployed (those jobless for 27 weeks or more) was essentially
unchanged at 1.2 million and accounted for 19.8 percent of the total unemployed.
(See table A-12.)

The labor force participation rate held at 62.6 percent in May, and the
employment-population ratio, at 60.3 percent, was little changed.
(See table A-1.)

The number of persons employed part time for economic reasons, at 3.7 million,
changed little in May. These individuals, who would have preferred full-time
employment, were working part time because their hours had been reduced or they
were unable to find full-time jobs. (See table A-8.)

The number of persons not in the labor force who currently want a job was 5.5
million in May, little different from the prior month. These individuals were
not counted as unemployed because they were not actively looking for work
during the 4 weeks preceding the survey or were unavailable to take a job.
(See table A-1.)

Among those not in the labor force who wanted a job, the number of persons
marginally attached to the labor force was little changed at 1.5 million in
May. These individuals wanted and were available for work and had looked for
a job sometime in the prior 12 months but had not looked for work in the 4
weeks preceding the survey. The number of discouraged workers, a subset of
the marginally attached who believed that no jobs were available for them,
was little changed over the month at 422,000. (See Summary table A.)

Establishment Survey Data

Total nonfarm payroll employment increased by 339,000 in May, in line with
the average monthly gain of 341,000 over the prior 12 months. In May, job
gains occurred in professional and business services, government, health
care, construction, transportation and warehousing, and social assistance.
(See table B-1.)

In May, professional and business services added 64,000 jobs, following an
increase of similar size in April. Employment growth continued in
professional, scientific, and technical services, which added 43,000 jobs
in May.

Government employment increased by 56,000 in May, compared with the average
monthly gain of 42,000 over the prior 12 months. Employment in government
is below its pre-pandemic February 2020 level by 209,000, or 0.9 percent.

Health care added 52,000 jobs in May, similar to the average monthly gain
of 50,000 over the prior 12 months. In May, job growth occurred in
ambulatory health care services (+24,000), hospitals (+20,000), and
nursing and residential care facilities (+9,000).

Employment in leisure and hospitality continued to trend up in May
(+48,000), largely in food services and drinking places (+33,000).
Leisure and hospitality had added an average of 77,000 jobs per month
over the prior 12 months. Employment in this industry remains below its
February 2020 level by 349,000, or 2.1 percent.

In May, construction added 25,000 jobs, including 11,000 jobs in heavy and
civil engineering construction. Over the prior 12 months, construction had
added an average of 17,000 jobs per month.

Employment in transportation and warehousing increased by 24,000 in May.
Transit and ground passenger transportation added 12,000 jobs, offsetting
a decrease in the prior month. In May, employment also increased in couriers
and messengers (+8,000) and air transportation (+3,000). Employment in
transportation and warehousing has shown no clear trend in recent months.

In May, employment in social assistance rose by 22,000, in line with the
average monthly gain of 23,000 over the prior 12 months. Over the month,
individual and family services added 17,000 jobs.

Employment was little changed over the month in other major industries,
including mining, quarrying, and oil and gas extraction; manufacturing;
wholesale trade; retail trade; information; financial activities; and other

In May, average hourly earnings for all employees on private nonfarm payrolls
rose by 11 cents, or 0.3 percent, to $33.44. Over the past 12 months, average
hourly earnings have increased by 4.3 percent. In May, average hourly earnings
of private-sector production and nonsupervisory employees rose by 13 cents, or
0.5 percent, to $28.75. (See tables B-3 and B-8.)

The average workweek for all employees on private nonfarm payrolls edged down
by 0.1 hour to 34.3 hours in May. In manufacturing, the average workweek was
unchanged at 40.1 hours, and overtime edged up by 0.1 hour to 3.0 hours. The
average workweek for production and nonsupervisory employees on private nonfarm
payrolls remained at 33.8 hours. (See tables B-2 and B-7.)

The change in total nonfarm payroll employment for March was revised up by 52,000,
from +165,000 to +217,000, and the change for April was revised up by 41,000, from
+253,000 to +294,000. With these revisions, employment in March and April combined
is 93,000 higher than previously reported. (Monthly revisions result from additional
reports received from businesses and government agencies since the last published
estimates and from the recalculation of seasonal factors.)

The Employment Situation for June is scheduled to be released on Friday, July 7,
2023, at 8:30 a.m. (ET).

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