May Jobs Report: Strong Job Growth Despite Steady Uptick in Unemployment Rate 

The Bureau of Labor Statistics on Friday reported the U.S. economy added 272,000 jobs, showcasing a significant boost in hiring from recent trends. 

From December 2023 to March 2024, the economy averaged a monthly addition of 275,000 jobs. Over April and May, that average has dipped to 223,500. 

That news is welcome to economists, who say the decrease in job gains over the last two months shows the job market is coming in greater balance with the rest of the economy. 

According to The New York Times, the unforeseen but strong spike in hiring, “shows that employers remain undaunted, despite pressure from high interest rates and slowing consumer spending.” 

Other important economic data released includes: 

• The unemployment rate in May rose to 4.0% for the first time in 29 months and from its previous rate of 3.9%.
• Average hourly earnings increased by 14 cents or 0.4 percent—a 4.1% increase from 2023. 
• Job gains were primarily in these industries: healthcare, government, and leisure and hospitality. 
• There were 8.1 million job openings on the last day in April—the lowest number since February 2021. There were 1.8 million fewer job openings in April 2024 than in April 2023. 
• Private employers added 152,000 jobs in May, reflecting the decline seen in the report. 
• The U.S. GDP grew just 1.3% in the first quarter, the slowest growth in two years. 
• Core Personal Consumption Expenditures (PCE)—an inflation reading that excludes the more volatile food and energy prices—were up 2.7% year-over-year in April, a slight downward turn from March. 

For the last two years, inflation has been discussed directly in context with the jobs report. That’s because, as interest rates rose to combat inflation, economists expected the jobs market to cool and wages to follow suit. However, it has remained pretty resilient, often adding significantly more jobs in a month than predicted. Wages have also been “sticky” in economists’ eyes—as wage gains decreased slower than inflation has.  

However, recent jobs reports, along with other economic data, “indicate that restrictive monetary policy is helping to cool off aggregate demand and the inflation data for April suggests that progress toward 2 percent has likely resumed,” said Governor Christopher J. Waller of the Federal Reserve. 

Some factors highlighted in a Federal Reserve speech in May that were important to track with regards to inflation and interest rates include:

• Consumer spending and prices 
• Labor demand 
• Wages 

All three are currently steady or declining. 

Business owners and lead decision makers have been encouraged to keep an eye on these metrics as the Federal Reserve debates when to start cutting interest rates. 

And while the goal is 2% inflation, that doesn’t mean interest rates will only start to be cut when the goal is hit.