Employers added 172,000 jobs in May, surging past expectations as labor market remains resilient

Employers added 172,000 jobs in May, blowing past analyst forecasts, as the labor market continued to show strength despite rising inflation and concerns about slowing economic growth.

By the numbers

Economists polled by FactSet predicted that the economy would gain 105,000 jobs in May.

The latest employment data follows two months of strong payroll gains. The Labor Department on Friday also revised payroll gains up for both March and April, bringing the totals up to 214,000 and 179,000, respectively.

The unemployment rate in May was 4.3%, unchanged from April.

Leisure and hospitality drove the bulk of the job growth, with the sector adding 70,000 jobs, higher than the average monthly gain of 14,000 over the last year. Local government also saw solid gains, with employment rising by 55,000. Health care, which has been the leading sector for employment growth in past reports, added 35,000 jobs in May.

The job market continued to expand in May despite rising price pressures from the Iran war. Inflation is now at the highest level in almost three years as the conflict in the Middle East squeezes global energy supplies. May’s employment numbers mark the third month of strong hiring, which economists say could give the Federal Reserve some breathing room as it turns its attention to tackling rising inflation. 

“This is a blowout jobs report,” said Olu Sonola, head of U.S. economics at Fitch Ratings, in an email. “Hiring remains narrow, but the headline strength is enough to keep the Fed focused on inflation. With inflation already accelerating, the bigger risk is rising price pressure — not a sustained weakening in labor demand.”

Sonola added, “That makes it much harder to argue for lower interest rates anytime soon.”

While hiring was robust, wage growth is lagging behind inflation. Average hourly earnings were 3.4% in May, below April’s 3.8% annual inflation rate.