Workers can cheer rising pay and continued strong hiring in a range of sectors, but the Federal Reserve is likely to conclude that its war on inflation isn’t over yet.
The U.S. economy added 272,000 jobs in May, bringing good news for workers but potentially complicating the Federal Reserve’s ongoing crusade against inflation.
The data, published Friday by the Bureau of Labor Statistics, offers a counterpoint to some employment market indicators that had shown signs of slowing as recently as this week. Economists had expected the economy to add 190,000 jobs, according to a Dow Jones survey.
“A long feared substantial slowdown in hiring has yet to show up,” Bankrate Senior Economic Analyst Mark Hamrick said in a statement Friday.
The unemployment rate ticked up to 4% but remains historically low, extending a 30-month streak of unemployment at or below that level. And in another bright spot for workers, average hourly earnings jumped 4.1% in May from the year before, up from a 3.9% annual rate in April.
Friday’s data reinforces expectations that the Federal Reserve will hold off cutting interest rates when it meets next week.
“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,” ZipRecruiter Chief Economist Julia Pollak said in a statement Friday. “Instead, economic data has been mixed.”
The central bank’s next decision on rates is due Wednesday afternoon, hours after a fresh Consumer Price Index offers another inflation snapshot.
Despite last month’s hiring gains, job growth overall this year has cooled. In the run-up to Friday’s report, many economists said the steady slowdown looked more like normalization toward pre-pandemic hiring trends than a sign of an imminent recession.
On Wednesday, payroll processor ADP found private employers added just 152,000 roles in May, far fewer than expected. And earlier this week, the BLS reported that the ratio of unemployed workers to job openings had climbed back to the level seen just before the outbreak of the Covid pandemic.
But the change in that figure is primarily a result of firms deciding they don’t need to fill as many roles, and not because of a surge in unemployment, analysts say.
“Businesses are just not laying off [many] workers,” Mark Zandi, chief economist at Moody’s Analytics financial services group, said Thursday, ahead of the report. “There’s still underlying job growth,” he said, even though many companies are cutting back on hiring, hours and temporary work.
The U.S. economy overall is still on firm footing. Fed officials continue to say uncertainty remains about how much longer the rapid price growth that has bedeviled consumers for the last couple years will continue. Since peaking above 9% in summer 2022, inflation is much slower but has largely hovered above 3% all year — higher than the Fed’s 2% target.
A slower pace of job growth, economists say, should cool inflation further, as employers ease up on raising pay to attract workers, who in turn should rein in their spending, leading businesses to pull back their price hikes — a virtuous circle.
Already, fewer people who are currently employed are seeking opportunities elsewhere. The BLS also reported this week that the rate of workers quitting has held steady for six months, even as it’s down significantly from its post-pandemic high.
It’s a sign that the “great resignation,” which saw workers taking up new roles in droves — usually for higher pay as businesses reopened during the pandemic — is mostly behind us, replaced instead by the “great stay.”
Robust hiring for lower-paid workers
Friday’s report showed job gains in a range of sectors, led by health care, government, leisure and hospitality and a category of “professional” services that includes many tech roles.
Vanguard, a financial services group, has found hiring for middle- and high-income workers has slowed, while lower-paid workers continue to be hired at a healthy clip. Lower-paid workers are now making more than they were before the pandemic, even though inflation has eaten into their spending power. Hiring forums show McDonald’s now pays its hourly employees as much as $13 an hour, compared with as little as $10 pre-pandemic.
“We’re certainly seeing, within firms, that the hire rate among more costly or higher-paid workers has been going down,” said Fiona Grieg, global head of investor research and policy at Vanguard.
Some consolation for higher-paid workers may be found in LinkedIn data, which shows that although hiring rates are still down 10% year on year, they’re better than the trends seen for much of 2023.
Applicant ranks swell
But stabilization does not mean strength. LinkedIn told NBC News the number of job applications per applicant rose 14% from November 2023 to March of this year. Over the same period, 25% more U.S. LinkedIn users marked themselves as “open to work” on the platform.
“If you’re a high-wage worker right now and you’re sitting on the sidelines, the job search may take some time,” Vanguard’s Grieg said.
Tre Gripper, 32, posted to X this week to say that since being laid off in June 2023, he had unsuccessfully applied to approximately 463 roles.
“It’s demoralizing,” Gripper told NBC News. “I’ve worked really hard in my field and to keep not getting anything.”
The Houston resident has supported himself in part thanks to a generous transition bonus and severance package he received from his previous employer. But those resources have since been depleted, Gripper said, and now he and his husband are planning to move to Seattle for both of their careers.
And since his X post, which now links to his LinkedIn profile, went viral — racking up more than 12 million views — he’s seen a surge in opportunities.
His takeaway: “Unless someone is pushing you through, recruiters aren’t even seeing your application.”
Source: NBC News
