America’s employers created a strong 272,000 new jobs in May, accelerating from April And it is a sign that companies still have enough confidence in the economy to continue hiring despite persistently high interest rates.
Last month’s strong job growth reflected the resilience of America’s consumer-driven economy. As the country’s households continue to spend at a steady pace, many employers have had to continue hiring new workers to meet their customers’ demand.
The unemployment rate rose from 3.9% to a still-low 4%, ending a 27-month streak of unemployment below 4%, the Labor Department said. said Friday. This was the longest period of its kind since the late 1960s.
President Joe Biden is likely to point to Friday’s jobs report as a sign of his administration’s robust economic health. Presumptive Republican nominee Donald Trump has focused his criticism of Biden’s economic policies on the rise in inflation, which polls show still looms large in voters’ assessments of the economy.
Last month’s strong job gains suggest the economy should continue to grow at a steady pace. A healthy labor market typically drives consumer spending, the economy’s main engine. But some recent signs of economic weakness have raised concerns that growth could stall. The May jobs report could help ease those worries.
Still, inflation fighters at the Federal Reserve would like to see a slight slowdown in the economy as they consider when to start cutting their benchmark interest rate. The Fed has raised rates sharply in 2022 and 2023 after the strong recovery from the pandemic-induced recession triggered the worst inflation in 40 years.
Annual inflation has fallen to 2.7% by the Fed’s preferred measure, still above the Fed’s 2% target. Lower hiring over time could slow wage gains and help contain inflation entirely. Chair Jerome Powell said the Fed needs to have more confidence that inflation will return to its target on a sustained basis before it can lower borrowing costs.
Frank Fiorille, Vice President of Compliance and Data Analytics at Payrolla payroll provider for small businesses, said its clients actually saw an increase in hiring last month.
“We still hear pretty positive things about these types of small family businesses on Main Street,” Fiorille said.
Fed officials will closely scrutinize Friday’s data on job growth and wage gains as they consider their next steps on interest rates, particularly when to start cutting the benchmark interest rate. In its fight against inflation, the central bank has raised its benchmark interest rate 11 times since March 2022, reaching its current 22-year high. When policymakers meet next week, they are expected to leave their benchmark interest rate unchanged but update their economic forecasts, and Chair Jerome Powell will hold a press conference.
When the Fed began raising interest rates aggressively, most economists expected the resulting rise in borrowing costs to trigger a recession and drive unemployment to painfully high levels. But the labor market has proven more resilient than almost anyone predicted. Still, Americans in general remain frustrated by high prices, a persistent source of discontent that could threaten President Joe Biden’s re-election.
A key reason the economy is still experiencing solid net job growth is that layoffs remain at historic lows. Only 1.5 million people lost their jobs in April, the lowest monthly rate in 24 years, excluding the peak of the pandemic.
After years of difficulty filling vacancies, it is now becoming apparent that most employers are reluctant to lay off employees.