US economy adds more jobs than expected in May as unemployment rate ticks higher

06/07/2024 19:51

The May jobs report comes as the stock market has hit record highs amid a slew of softer-than-expected economic data, increasing investor confidence that the Federal Reserve could cut interest rates as of September.

The US economy added more jobs than expected in May defying previous signs of a slowdown in the US economy.

Data from the Bureau of Labor Statistics released Friday showed the labor market added 272,000 nonfarm payroll jobs in May, significantly more additions than the 185,000 expected by economists.

Meanwhile, the unemployment rate rose to 4% from 3.9% the month prior. May's job additions came in significantly higher than the 165,000 jobs added in April.

Meanwhile, wages, considered an important metric for inflation pressures, increased 4.1% year over year, reversing a downward trend in year over year growth from the month prior. On a monthly basis, wages increased 0.4%, an increase from the previous month's 0.2% gain.

Also in Friday’s report, the labor force participation rate slipped to 62.5% from 62.7% the month prior. However, participation among prime-age workers ages 25-54 rose to 83.6%, its highest level in 22 years.

The largest jobs increases in Friday's report were seen in healthcare, which added 68,000 jobs in. May. Meanwhile, government employment added 43,000 jobs. Leisure and hospitality added 42,000 jobs.

The report comes as the stock market has hit record highs amid a slew of softer-than-expected economic data, which had increased investor confidence that the Federal Reserve could cut interest rates as of September. After Friday's labor report, that trend reversed with investors pricing in a 53% chance the Fed cuts rates in September, down from a roughly 69% chance seen just a day prior, per the CME FedWatch Tool.

LOS ANGELES, CALIFORNIA - JANUARY 25: An American flag flies from a crane as construction worker helps build a mixed-use apartment complex which will hold over 700 units of apartment housing and 95,000 square feet of commercial space on January 25, 2024 in Los Angeles, California. Economic data from the Commerce Department released today showed that U.S. economy expanded 3.1 percent in 2023, shaking off inflation fears and making the U.S. the fastest growing advanced economy in the world in 2023. (Photo by Mario Tama/Getty Images) — An American flag flies from a crane as a construction worker helps build a mixed-use apartment complex on Jan. 25, 2024, in Los Angeles, California. (Mario Tama/Getty Images) (Mario Tama via Getty Images)

Other data out this week has reflected a still-resilient labor market that's showing further signs of normalizing to pre-pandemic levels. The latest Job Openings and Labor Turnover Survey (JOLTS), released Tuesday, showed job openings fell in April to their lowest level since February 2021.

Notably, the ratio between the number of job openings and unemployed people returned to 1.2 in May, which is in line with pre-pandemic levels.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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