Economy added 272,000 jobs in May, surging past expectations (2024)

“The American middle class is seeing their economic standing improved. The strong wages and improving living standards are the main takeaway from this very strong jobs report,” said Joe Brusuelas, chief economist for the accounting firm RSM US.

Average hourly wage growth accelerated sharply in May, to $34.91, up 4.1 percent from the previous year. Wages have consistently beaten inflation for nearly a year, boosting American workers’ standard of living after years of wages falling behind inflation.

In a new milestone, 78 percent of women ages 25 to 54 had or were looking for jobs — the highest level since record keeping started in the 1950s. Higher wages and plentiful opportunities have enticed women into the workforce after the child-care crisis of the coronavirus pandemic pulled them onto the sidelines. Indeed, some of the largest job gains happened in sectors that tend to employ more women, including health care, government, and leisure and hospitality.

“The labor market remains tight, and firms have to compete and offer higher wages to attract and retain workers,” Brusuelas said. “If someone loses a job, they’re finding one in three months. This really is the best labor market since the 1950s.”

The strength of the May jobs report surprised economists, because economic growth and consumer spending have lately shown signs of slowing, partly weighed down by higher borrowing costs, according to recent federal data. It also marked the 41st consecutive month of job gains, going back to January 2021.

That’s good news for President Biden, who on the campaign trail has been making the case that his economy has reinvigorated the middle class. In a statement Friday, Biden said May’s jobs numbers indicate that “the great American comeback continues,” boasting that under his presidency, “15.6 million more Americans have the dignity and respect that comes with a job.” He also noted that “more progress” needs to be made, in a nod to gloomier consumer sentiment about inflation that could cost him at the polls.

The hotter-than-expected data complicates the path forward for Federal Reserve policymakers who are looking for more concrete signs of an economic cool down, confirming that inflation has fallen enough that they can start to lower interest rates.

Indeed, financial markets opened lower on the jobs news in trading activity Friday morning, as investors had been hoping for an interest-rate cut in coming months. Markets largely rebounded, ending the session slightly lower. The S&P 500 dipped 0.1 percent, while the Dow Jones Industrial Average and tech-heavy Nasdaq composite index shed 0.2 percent.

Health care led the way on jobs yet again, with 68,000 new positions in May, including large gains in hospitals and nursing and residential care facilities. The sector has faced enormous demand since the pandemic began, thanks to the needs of an aging baby boomer population.

Meanwhile, the public sector added 43,000 jobs, largely in local government. City and county governments have been hiring workers, particularly teachers, through higher wages, after facing severe labor shortages in recent years. Local governments also tend to pour resources into hiring police officers and other staff during major election years.

In Newark, thousands of public school teachers won robust pay increases in their new union contract — around 4.5 percent a year for the next five years. Those raises, along with other new benefits, are expected to help the urban school district hire and retain teachers.

Among them is John Cunha, a 33-year physical education teacher who will see a salary bump up of several thousand dollars, to roughly $109,000 this year and $124,000 in five years. “We’re going to able to concentrate more at work not having to worry about paying bills and to live without so much financial stress,” Cunha said.

Leisure and hospitality, another major driver of recent job growth after the pandemic shutdown decimated the sector, added 42,000 jobs in May, mostly in restaurants and bars.

Professional, scientific and technical services — composed of white-collar industries such as consulting and law — also saw a glimmer of hope with its first major boost in months, adding 32,000 jobs in May. That’s nearly double the sector average monthly increase over the past year.

“This particular industry was hit very hard by interest rates so they’ve had a really lackluster past year,” said Kory Kantenga, head of economics Americas at LinkedIn. “But if they’re anticipating [interest] rates coming down, then they’re more likely to staff up.”

Employers in construction, manufacturing, trade, warehousing and transportation, and financial activities — all sensitive to higher interest rates — saw little or no growth last month.

Despite the strong report, there are signs of softening, offering mixed messages about the state of the labor market.

Meanwhile, the unemployment rate edged up for Latinos, Asians, teenagers and adult men, and unemployment jumped for African Americans in May, hitting 6.1 percent, up from 5.6 percent in April.

Economists monitor closely the unemployment rate for African Americans, a group vulnerable to weaknesses in the labor market, but cautioned against reading too closely into May’s jump in unemployment unless the trend continues.

The unemployment rate comes from a survey of households, which also indicated that 408,000 fewer people were working in May than in April — often a red flag for policymakers. That survey has been out of step with the survey of employers, which showed strong job creation in May. Analysts suggest that the survey of businesses is a more reliable source than the household survey.

But other warning signs exist in the labor market, as well. Job openings fell to a three-year low in April, according to a separate report from the Labor Department this week. The ratio of job openings to unemployed workers is back down to pre-pandemic levels.

Most signs point to a job market in a healthy spot. Layoffs remain near historic lows as employers are cautious to let people go; workers are staying in place, rather than switching jobs as they did a few years ago, when employers had to compete fiercely to keep up with demand.

“You have to zoom out and look at the overall picture,” said Julia Pollak, chief economist at ZipRecruiter. “This is a new normal — a less dynamic and more stay-in-place labor market where companies aren’t firing people quite as much and people aren’t switching jobs quite as much. As a result, companies aren’t having to hire quite as much either.”

One reason that the labor market has grown steadily over the past year, boosting the overall economy, is due to a major pickup in immigration that helped close long-standing labor shortages. More than 3 million immigrants arrived in the United States in 2023, according to data from the Congressional Budget Office.

Biden’s new plan announced this week to shut off access to the U.S. asylum system when illegal border crossings surpass a daily threshold could change labor market dynamics.

“Immigration has played a very important role in bolstering our economy,” said Brusuelas, chief economist for the accounting firm RSM US. “If we do see a curtailment of immigration, then I would expect that would create a tighter labor market. That would likely send the unemployment rate down and cause wages to rise.”