Job creation continued its impressive run in May, even as government policymakers took steps to cool the economy and ease inflation.
The Labor Department reported Friday that employers added 390,000 jobs, the 17th consecutive monthly gain.
The jobless rate was 3.6 percent for the third straight month, near a half-century low. Average hourly earnings for employees increased 10 cents, or 0.3 percent per month, and were 5.2 percent higher than a year earlier.
Job growth was broad and led by the leisure and hospitality sector, as consumers continued to shift their spending habits from goods to services such as travel, dining and entertainment.
The shortfall in total employment compared to pre-pandemic levels is about 800,000.
“We’re in the home stretch here: We could be about two months away from being at the level of employment that we had before the pandemic in February 2020,” said Andrew Flowers, a labor economist at Appcast, a firm that helps companies guide your sales online. recruiting efforts.
Record levels of consumer spending, which make up about 70 percent of the economy, have fueled business expansion and job creation as businesses try to meet demand for a wide variety of goods and services. The hiring push has given some workers a degree of agency over pay and conditions that is unfamiliar to both job seekers and employers.
But the Federal Reserve is concerned that rising labor costs will be passed on to consumers, limiting efforts to reduce inflation, which is near a 40-year high.
Last month, Jerome H. Powell, chairman of the Fed, emphasized that his institution’s attempts to cool prices were part of ensuring a more sustainable form of full employment. “We have to get back to price stability so we can have a labor market where people’s wages aren’t eaten up by inflation,” he said. “And where we can also have a long expansion.”
Throughout the year, price increases and general economic volatility have created a dissonance between sour consumer sentiment and relatively positive raw data. Checking accounts are still above 2019 levels for almost all income groups. And the number of households under duress as a result of the debt burden is historically low. New bankruptcies and debt collection proceedings are at their lowest level since tracking began in 1999.
To some economists, Friday’s report is early evidence that the Fed’s ambitious plan to engineer a modest economic slowdown to avoid a painful recession could be achieved. The Labor Department announced Wednesday that layoffs were at an all-time low. But it also showed that the huge gap between job openings and job seekers has narrowed.
“Companies with high profitability, easy access to capital, the ability to automate and pricing power are still eager to hire,” said Bill Adams, chief economist at Comerica Bank, a large Texas-based commercial bank. “But companies that see their margins squeezed by rising costs, like hospitality, or see demand weaken, like retail, are withdrawing job postings as their outlook softens. And competition for workers is driving lower-paying employers out of the labor market.”