Hiring stayed strong in May, with employers adding 390,000 jobs
Hiring remained strong in May, with employers adding 390,000 jobs despite high inflation and worries about an economic slowdown.
Last month's hiring exceeded economists' predictions that employers would add 325,000 jobs in May.
The unemployment rate stayed steady at 3.6%, on par with the last two months and the lowest level it's been during the pandemic. Wages grew 5.2% over the last 12 months, the Labor Department said Friday.
"The labor market seems to have shrugged off the headwinds buffeting the economy from higher inflation and interest rates," Sophia Koropeckyj, managing director at Moody's Analytics, said in a research note. "Workers who are coming into the labor force are readily finding employment and we still expect more workers who left the labor force during the pandemic to return."
Leisure and hospitality, professional and business services and transportation and warehousing led the job gains, the Labor Department said. But nearly every major industry increased head count — a sign that the recovery is widespread.
Red-hot job market cooling
Still, there are signs the job market may be cooling from its red-hot pace last year. The retail sector lost 60,000 jobs last month, underlining slowing spending in that sector. Large retailers including Walmart and Target have pulled back on expansions plans amid disappointing earning this year. Last month, Walmart said it had over-hired and then reduced its head count through attrition.
Pay increases are slowing and are well below the rate of inflation, which is currently above 8%. The Labor Department's hiring estimates for the last two months were revised lower, showing 22,000 fewer people hired than initially estimated.
The number of people working part-time who would have preferred full-time work jumped by nearly 300,000, reflecting job hours that were cut "due to slack work or business conditions," the Labor Department said.
Major tech companies have been scaling back expansion plans and laying off workers as their stocks have been clobbered.
"Even though some parts of the economy are seeing a slowdown, other parts are accelerating," Daniel Zhao, senior economist at Glassdoor, told CBS MoneyWatch. "We are seeing very strong employer demand, healthy job gains and pay increases, so overall it's a very healthy job market."
Interest rates set to rise
The solid pace of hiring bolsters the Federal Reserve's plan to hike interest rates aggressively this year as it moves to tamp down the hottest inflation in four decades.
"The strong May figures will only encourage the Federal Reserve ... to stick to its course of more aggressive monetary tightening, as inflation remains near a 40-year high," said Andrew Viteritti, commerce and regulation lead at the Economist Forecasting Unit. "Sequential rate increases, including two more half-point hikes in June and July, will take some of the heat out of the labor market during the second half of this year, as business sentiment dampens."
The Fed's moves have already sharply increased mortgage rates and contributed to drops in sales of new and existing homes. The rate hikes have also magnified borrowing costs for businesses, which may respond by reducing their investment in new buildings and equipment, slowing growth in the process.
The Associated Press contributed reporting.