A hiring sign is displayed at a restaurant in Schaumburg, Illinois on April 1, 2022.
WASHINGTON (AP) — U.S. employers added 390,000 jobs in May, extending a strong hiring streak that has supported an economy under pressure from high inflation and rising interest rates.
Last month’s gain reflects a resilient labor market that has so far ignored fears that the economy will weaken in the coming months as the Federal Reserve steadily raises interest rates to fight inflation . The jobless rate remained at 3.6% in May, just above a half-century low, the Labor Department said Friday.
Job growth in May was strong enough to keep the Fed on track to continue what will likely be the fastest streak of rate hikes in over 30 years. Stock market futures fell on Friday after the government released the jobs report, reflecting that concern.
Companies in many sectors are desperate to hire because their customers have continued to spend freely despite growing concerns about high inflation. Americans’ finances have been boosted by rising wages and an unusually large pool of savings accumulated during the pandemic, especially by high-income households.
Workers, in general, enjoy almost unprecedented bargaining power. The number of people leaving their jobs, usually for better, better paid positions, has reached or is approaching a six-month high.
In May, Friday’s jobs report showed more Americans withdrew from the labor force and found jobs, a sign that rising wages and plentiful opportunities are encouraging people to look for work. Rising prices may also have led some to take jobs: The number of people aged 55 or older who are working rose last month, suggesting that some older Americans are not retiring after quitting their jobs – or have been laid off – during the pandemic and its aftermath.
The average hourly wage rose 10 cents in May to $31.95, the government said, a solid gain but not enough to keep up with inflation. Compared with 12 months earlier, hourly wages rose 5.2%, down from a 5.5% year-over-year gain in April and the second consecutive decline. More moderate wage increases could ease inflationary pressures in the economy and help sustain growth.
Almost all major industries added workers in May. A major exception was retail, which lost nearly 61,000 jobs. Some major retailers, including Walmart and Target, reported disappointing sales and profits. Last month, Walmart said it overhired and then reduced its workforce through attrition.
Construction companies have created 36,000 jobs, a sign of hope for Americans who have bought new homes that have yet to be built due to labor and parts shortages. Shipping and warehousing companies, still struggling to keep up with the growth of e-commerce, added 47,000 jobs. Restaurants, hotels and entertainment venues hired 84,000 people.
The strength of the labor market itself contributes to inflationary pressures. With wages rising across the economy, companies are passing on at least some of their increased labor costs to their customers in the form of higher prices. The costs of food, gasoline, rent and other items — which fall disproportionately on low-income households — are accelerating at nearly the fastest rate in 40 years.
Inflation had started to soar last year as growing demand for cars, furniture, electronic equipment and other physical goods came up against overstretched supply chains and shortages of rooms. More recently, prices for services such as airline tickets, hotel rooms and restaurant meals have jumped as Americans shift more of their spending to these areas.
In an attempt to cool spending and slow inflation, the Fed last month hiked its short-term rate by half a point, its biggest hike since 2000, to a range of 0.75% to 1%. . Two more half-point rate hikes are expected this month and in July. And some Fed officials have suggested in recent speeches that if inflation shows no signs of slowing, they could implement another half-point hike in September.
The Fed’s actions have already raised mortgage rates sharply and contributed to lower sales of new and existing homes. The rate hikes have also amplified borrowing costs for businesses, which may respond by reducing investment in new buildings and equipment, slowing growth.