May Jobs Report Exceeds Expectations, Adding 339,000 Jobs and Boosting US Economy

In an unexpected twist, the recently released May jobs report showcases a thriving US economy that generated an impressive 339,000 jobs last month, despite a slight rise in the unemployment rate to 3.7%.

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Providing a ray of hope, the Bureau of Labor Statistics revealed that nonfarm payroll jobs experienced substantial growth, surpassing the projections set by Wall Street economists for the 14th consecutive month.

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THE EMPLOYMENT SITUATION — MAY 2023 | Source: BUREAU OF LABOR STATISTICS

With the Federal Reserve's upcoming policy meeting just around the corner, this report has sparked speculation among investors. Many now believe that the central bank may halt its ongoing rate hiking campaign, given the labor market's impressive resilience. According to data from the CME Group, there is a 70% likelihood that the Fed will maintain the interest rates within a range of 5% to 5.25%.

Commenting on the report, Morgan Stanley's chief US economist, Ellen Zetner, expressed her thoughts, stating, "While today's report may not be strong enough to convince the Fed to raise rates in June, it does raise the possibility of a rate hike in July. Although the payroll numbers were undeniably robust, the FOMC will also focus on the unemployment rate."

Let's delve into the key figures from the report and compare them to Bloomberg's estimates:

• Nonfarm payrolls: +339,000 jobs (vs. +195,000 estimated)

• Unemployment rate: 3.7% (vs. 3.5% estimated)

• Month-on-month average hourly earnings: +0.3% (on par with the estimated +0.3%)

• Year-on-year average hourly earnings: +4.3% (compared to the estimated +4.4%)

• Average weekly hours worked: 34.3 (marginally lower than the estimated 34.4)

Furthermore, the employment gains from the past two months were revised upward, indicating even stronger growth. The revised data reveals that April saw the creation of 294,000 jobs, surpassing the previous report by an additional 41,000 jobs. Additionally, March's job gains were revised from 165,000 to 217,000, signifying that job growth during this two-month period exceeded the initial report by an impressive 93,000.

Analyzing the industry breakdown, the business and services sector experienced significant growth by adding 64,000 jobs. The government sector contributed 56,000 jobs, while the healthcare industry played a major role in job creation with 52,000 new positions in May. Another notable contributor was the leisure and hospitality sector, which added 48,000 jobs, with 33,000 of those positions falling within the food services and drinking places category.

The construction industry demonstrated its resilience by adding 25,000 jobs in May, surpassing the 12-month average by 7,000 positions.

President Biden expressed his satisfaction with the report, remarking, "Today is a promising day for the American economy and American workers."

The May jobs report undoubtedly reveals a robust and thriving US economy, defying expectations and providing a positive outlook for the labor market. As the Federal Reserve evaluates its next steps, all eyes remain focused on the potential impact on interest rates and the nation's economic trajectory.

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