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US Hiring Surges Past Expectations as Job Market Still Strong

June 7, 2024
With the economy still adding more jobs than anticipated, analysts expect the Fed to hold off rate reductions for longer.
U.S. job growth blew past estimates in May even as unemployment edged up, data showed Friday, underscoring the labor market's resilience as policymakers seek to cool the economy gradually.

But the hotter than expected figures could complicate the Federal Reserve's calculus as it weighs the right time to lower interest rates.

It also remains to be seen if positive employment data would translate into rosier perceptions of President Joe Biden, who has been struggling to convince voters of his handling of the economy.

The world's biggest economy added 272,000 jobs last month, up from a revised 165,000 in April, said the Department of Labor.

This was significantly above the 185,000 increase analysts predicted according to Briefing.com. It was also the highest level since December 2023.

The jobless rate crept up from 3.9% to 4.0%. But unemployment remains relatively low compared with recent decades, painting a picture of a still-healthy labor market.

"The great American comeback continues, but we still have to make more progress," said Biden in a statement.

He added that unemployment has been at or below four percent for 30 months, calling this "the longest stretch in 50 years."

- Later rate cuts -

"The mixed report will complicate the Fed's job," said Julia Pollak, chief economist at employment platform ZipRecruiter.

"Fed members and investors had clearly been hoping for a softer report, which would have raised confidence in the appropriateness of a July or September rate cut," she added.

The U.S. central bank has held rates at a 23-year high in recent months, in hopes of easing demand to lower inflation sustainably.

With the economy still adding more jobs than anticipated, analysts expect the Fed to hold off rate reductions for longer.

A hot labor market could "help keep inflation more buoyant and delay Fed rate cuts to later this year or into next year," cautioned Nationwide Chief Economist Kathy Bostjancic.

- 'Steady expansion' -

In May, sectors like health care and government, as well as leisure and hospitality, saw employment continuing to trend up, the Labor Department said.

While average hourly earnings rose by 0.4% month-on-month, the year-on-year increase of 4.1% remains similar to rates in recent months.

Despite wage gains outpacing consumer price inflation, Americans "have not shown recognition, according to many polls, of an improving economy," said National Association of Realtors Chief Economist Lawrence Yun.

This is undoubtedly "due to the fact that the cumulative rise in consumer prices is still higher than the cumulative wage gain of the past four years," Yun said.

Yet "the report is good news for workers still seeking jobs, and stronger wage gains benefit Americans scrambling to deal with high inflation," added Robert Frick, Navy Federal Credit Union corporate economist.

"The report bodes well for the economy continuing its steady expansion through this year," he said.

A robust labor market has allowed consumers to keep spending even in the face of elevated interest rates -- boosting the economy.

Futures traders widely expect Fed officials to hold rates steady until at least September, according to CME Group's FedWatch Tool.

The Fed's next policy meeting takes place on Tuesday and Wednesday.

All rights reserved ©2024 Agence France-Presse.

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