US labor market keeps Fed on rate hike path

News Desk
Sunday, Jun 05, 2022

WASHINGTON: US employers hired more workers than expected in May and maintained a fairly strong pace of wage increases, signs of labor market strength that will keep the Federal Reserve on an aggressive monetary policy tightening path to cool demand.

The Labor Department's closely watched employment showed the unemployment rate holding steady at 3.6 percent for a third straight month, even as more people entered the labor force. It sketched a picture of an economy that continues to expand, although at a moderate pace. The U.S. central bank's interest rate hike campaign and tightening financial conditions have caused anxiety among investors about a recession next year.

"The economy is miles away from being wrecked on the shores of recession with the economy continuing to hire workers at this fast of a clip," said Christopher Rupkey, chief economist at FWDBONDS in New York. "It is not slowing enough to put the inflation fire out. The Fed's work is not done."

The survey of establishments showed that nonfarm payrolls increased by 390,000 jobs last month. Data for April was revised higher to show payrolls rising by 436,000 jobs instead of 428,000 as previously estimated. While May's job gains were the smallest in a year, they were way above the monthly average that prevailed before the Covid-19 pandemic in 2020.

Employment now is just 822,000 jobs below its pre-pandemic level. Most industries with the exception of leisure and hospitality, manufacturing, healthcare, wholesale trade and local government education have recouped all the jobs lost during the pandemic.

Economists polled by Reuters had forecast payrolls increasing by 325,000 jobs last month. Estimates ranged from as low as 250,000 jobs added to as high as 477,000.

The almost broad increase in hiring was led by the leisure and hospitality industry, where payrolls increased by 84,000 jobs, with restaurants and bars accounting for 46,000 of positions.