US economy heats up with 339,000 jobs added in May

Resilient labour market has frustrated efforts by Federal Reserve to cool economy

Visitors attend the Venture Miami Tech Hiring Fair in Florida. AP
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A US employment report closely watched by the Federal Reserve exceeded expectations in May, underlining a strong labour market that is complicating the central bank's efforts to rein in rising costs.

Employers added 339,000 jobs last month, data released by the Labour Department on Friday showed, down from an upwardly revised 294,000 jobs in April. Economists surveyed by Dow Jones projected the economy to add 190,000 jobs in May.

The unemployment rate climbed 3.7 per cent, up from 3.4 per cent last month.

The labour market has remained resilient in spite of the Federal Reserve's efforts to cool the economy. The central bank has raised interest rates 10 times since March 2022 to the range of 5 and 5.25 per cent, but the US continues to add jobs at a solid pace.

Friday's report provided the Fed with mixed messages on the state of the economy. While job gains do show a resilient labour market, the rise in unemployment was the largest since April 2020.

Meanwhile, wage growth decelerated. Average hourly earnings rose 0.3 per cent last month and 4.3 per cent on an annual basis, down from 4.4 per cent last month.

A separate Labour Department report on Wednesday showed that job openings increased to 10.1 million in April.

The mixed messages from Friday's report comes at a time when the Fed is considering pausing its interest rate increases.

Fed Governor and vice chairman nominee Philip Jefferson said this week that skipping a rate hike at a coming meeting would allow the Fed to assess more data before it decides on additional policy firming.

Patrick Harker, who heads the Federal Reserve Bank in Philadelphia, also said “we should at least skip this meeting in terms of an increase”.

More than 75 per cent of traders anticipate a rate pause at the conclusion of the Federal Open Market Committee's two-day meeting on June 14, data from the CME Group shows.

Updated: June 02, 2023, 1:19 PM