Employers Added a Robust 172,000 Jobs in May
Unemployment remained steady at 4.3 percent. Note: Data is seasonally adjusted. The average is calculated as a three-month moving average. Source: Bureau of Labor Statistics. By The New York Times The New York Times American employers hired vigorously in May, in a sign that the labor market is on a genuine upswing after last year’s lull. The economy added 172,000 jobs last month, more than economists had expected, while the unemployment rate stayed at 4.3 percent. The robust reading follows other data suggesting that labor demand has found its footing after a year of trade policy swings, immigration enforcement disruption and an exodus from the federal government. With revisions, March and April added 93,000 more jobs than previously reported. That puts average job growth in 2026 at about 114,000 positions per month, much stronger than the 10,000 average last year. That’s much faster than the rate at which people have been coming into the labor market: The Trump administration has squeezed net immigration to near zero. “May’s report was great news for the economy,” said Bill Adams, chief economist at Fifth Third Commercial Bank. “If job growth holds at this stronger pace, the economy is heading for a lower unemployment rate, and possibly labor shortages.” Wages cooling further: Average hourly earnings grew 3.4 percent from a year earlier, the slowest rate since August 2021. Although it may reflect the composition of job growth, as more lower-wage jobs have been added in recent months, that’s now substantially behind the rate of inflation, which was 3.8 percent over the year in April. Rising energy costs because of the outbreak of war in the Middle East have forced consumers to dip into savings to meet essential needs. Leisure boom: Growth was led last month by leisure and hospitality, which packed on 70,000 jobs. Some of that may have been early hiring for the World Cup as cities across the country prepared for an influx of tourists. Health care, which has been the steady fuel of job growth over the past several years, added another 35,000 positions. Federal exodus slowing: The federal government was about level, after having lost about 350,000 jobs since peaking toward the end of 2024. But local government surged, adding 55,000 jobs in May, mostly outside education. Fed meeting incoming: The Federal Reserve’s rate-setting committee meets in two weeks. Some officials have become more nervous about inflation in recent months, putting the possibility of interest rate hikes on the table for this year. Investors are now pricing in a full 0.25 percentage point increase to interest rates as soon as December, as the strong labor market data today has prompted investors to further back away from the possibility of rate cuts. The White House celebrated a stronger-than-expected jobs report on Friday, insisting that the uptick in hiring shows that the U.S. economy remains strong even as the war with Iran continues to elevate oil and gas prices. The report, which showed that employers added 172,000 jobs in May, doubled as a political win for President Trump, who has struggled for months to tamp down voters’ mounting economic anxieties. It offers him a new talking point as he races to shore up support for his flagging agenda, months before voters head to the ballot box for the midterm elections. But the strong hiring, which greatly outpaced analyst expectations, came with an important caveat. The growth in the labor market — on top of uncomfortably high inflation recently — seemed to reduce the chances that the Federal Reserve would lower interest rates any time soon. Mr. Trump has repeatedly called for those steep cuts. Weeks ago, he celebrated the swearing in of his new chair of the central bank, Kevin M. Warsh, with the hopes that he might soon achieve them. And yet, the current trajectory of the economy made it less likely than ever that the Fed would slash rates. Markets now expect the next move to be a rate increase, possibly in 2027. “This is about the strongest market of my lifetime,” Kevin Hassett, the director of the White House National Economic Council, said of the labor gains during an appearance Friday on CNBC. Mr. Hassett chalked up the “enormous amount of positive momentum in hiring” to the president’s policies, including the tax cuts he enacted last year. That, he said, should spur growth, but not in a way that would compel the Fed to raise rates. “It’s a supply-side driven job market boom, which I think means the Fed can watch the inflation numbers and wait awhile before it does anything about it,” he said. Since the start of the war, Mr. Trump and his top aides have tried to downplay the economic consequences. The president has dismissed the fallout or described it as only temporary, and in some instances, he has suggested that he expected it to be far worse — causing the stock market to plummet while pushing oil and gas prices much higher. The price of a gallon of gasoline reached $4.22 nationally on Friday, according to AAA, down from its peak during the war but still significantly elevated from a year earlier. That has further weighed on American families, majorities of whom increasingly tell pollsters they are frustrated with the nation’s economic trajectory. Among the strains, workers’ earnings have not kept pace with the growth in prices, a gap that affected lower-income families the most. “President Trump’s failing economic agenda is shrinking families’ paychecks,” Senator Elizabeth Warren, Democrat of Massachusetts, said in a statement Friday. “Instead of fixing the economic pain he’s caused, Trump is doubling down on his reckless tariffs and his war in Iran.” Yet Mr. Trump has remained bullish in spite of those numbers. Speaking to reporters on Thursday, he repeated his belief that the debate around affordability was a “con job,” while boasting that the stock market is setting records under his watch. “There is clear momentum in the American economy as a result of President Trump’s proven economic agenda of tax cuts, deregulation, and energy abundance that’s unleashing the private sector,” Kush Desai, a White House spokesman, wrote on social media. The S&P 500 fell roughly 0.7 percent as trading got underway in New York on Friday, weighed down by rising rate expectations and some nervousness over the market’s reliance on A.I. The slide could end a run of nine weeks of gains for the index. If the S&P turns around today and ends the week on a high, it would be the longest weekly run for the index since the 1980’s. One thing that has concerned some economists in recent months is that job growth has been highly concentrated in a few sectors, mostly health care. So it’s notable that job growth has broadened out in recent months. One wonky but closely watched indicator of this is the “diffusion index,” which measures the share of industries that are adding or cutting jobs. The index was below 50 for much of last year, indicating that more industries were cutting jobs than adding them. But it has been over 50 every month this year, and hit 54.4 in May. Research suggests that even after the job market gets better, the cohort of young degree holders who graduated into a period of low hiring are likely to face consequences that could last for years. The overall job market is improving, and that is good news. But it’s still a tough job market for young graduates. Whereas typically, the unemployment rate for new grads is lower than the overall unemployment rate, that has shifted in recent years — and the gap has widened. In any other economy, average hourly earnings growth of 3.4 percent from a year earlier would be considered very healthy. But in recent months, inflation has spiked to 3.8 percent over the year, which means that workers on average are losing ground. Of course that mostly applies to lower-income consumers, while higher-income folks have seen a surge in their stock portfolios that has continued to drive spending. Adam Schickling, a senior economist with Vanguard, added a note of caution to this month’s big crop of jobs, which was about double what economists had expected. This spring was one of the warmest and driest on record, which tends to support hiring in sectors like leisure and hospitality and construction. That can turn into weakness later in the year. “There’s not a whole lot in here to indicate that we think the momentum is changing going forward,” Schickling told me. One notable industry that posted job losses was air transportation, which shed about 9,000 last month. That reflects the closure of Spirit Airlines, which left 17,000 full- and part-time Spirit employees without work. Whenever we get surprisingly strong economic data, I get questions from readers about whether we should trust the numbers coming out of this administration. It’s a reasonable question, given that President Trump fired the head of the Bureau of Labor Statistics last summer after the agency reported disappointing jobs figures. But there is no evidence that the administration is skewing the data. Current and former agency employees — including the fired commissioner herself — say they continue to trust the numbers, as do the Wall Street economists who scrutinize the figures each month. “We’ve gained more and more confidence in the last prints that the Fed doesn’t have to be worried about the labor market,” said Lindsay Rosner, head of multi sector fixed income investing at Goldman Sachs Asset Management. She said the Fed will be “laser focused on inflation and it will all come down to the duration of this war to determine the Fed’s next move.” Before the numbers came out, Lydia flagged the question of the “breakeven rate.” That is, the number of jobs the economy needs to add each month just to keep up with population growth. Many economists estimate that the breakeven rate has fallen close to zero over the past year, due to a combination of the falling birthrate and the Trump administration’s strict immigration policies. But it’s a bit hard to square those estimates with the recent numbers — if employers are adding more than 150,000 jobs per month, and the breakeven rate is near zero, then the unemployment rate should be falling. So far, though, it isn’t. After the April jobs report, there was some uncertainty from economists over whether the apparent string of stronger job growth meant that the labor market was emerging from its low-hire, low-fire stasis that has characterized it for much of the past two years. The May numbers seem to bolster the case that the labor market is becoming more dynamic. The numbers have already helped push up interest rate expectations in the market, with investors now forecasting that a rate increase from the Fed could come as soon as January. The expectation of interest rates remaining elevated appears to be weighing on the stock market, with futures on the S&P 500 sliding lower following the release of the latest jobs data. Although gains were broad-based, there were also some pockets of weakness. The information sector, which includes tech and media, lost 2,000 jobs, and the financial activities sector lost 22,000 jobs. These are sectors that economists are closely watching for signs that artificial intelligence is having an impact on jobs, though they say there is little evidence that the technology is reshaping the labor market at this point. With today’s numbers, including the revisions, employers have now added an average of 188,000 jobs over the past three months. That’s a remarkable turnaround from the end of last year, when employers were shedding tens of thousands of jobs on average. For policymakers at the Federal Reserve, this report will serve as just the latest piece of evidence that the labor market is in solid shape and that they can focus on controlling inflation. Investors had already all but given up on any chance that the central bank would cut rates in the near-term; these numbers could add to concerns that the Fed’s next move could be to raise rates instead. None of this makes it easy for the new Fed chair, Kevin Warsh, who will be under pressure from President Trump to deliver rate cuts early in his tenure. Other Fed officials have made clear they are in no rush to lower rates, and Warsh will have a hard time convincing them based on these numbers. The White House is almost certainly going to seize on the new jobs report to restate its central argument entering the midterm elections. To President Trump, the overall economy is faring well, even amid the war with Iran, and probably would be in better shape if he did not intervene in the Middle East. He has framed the war as necessary for national security, despite its clear, short-term costs. Job growth was broad-based. There were big gains in labor and hospitality (+70,000 jobs), health care and social assistance (+47,200 jobs) and, in a break from recent trends, government (+52,000 jobs). Manufacturers added 7,000 jobs. Well, I guess we have an answer to whether the labor market has gotten its mojo back from last year — or at least that’s what the evidence is pointing to at this point. The numbers are out! U.S. employers added 172,000 jobs in May and the unemployment rate remained unchanged at 4.3 percent. Markets are fairly muted ahead of the numbers. Futures on the S&P 500, which give investors the chance to bet on the market before exchanges open, nudged lower, threatening to end a run of nine straight weeks of gains for the index. Oil prices also inched lower. Note: Data shows future contract prices for West Texas Intermediate light sweet crude oil and is delayed at least 15 minutes.
