A man walks past the US Federal Reserve in Washington DC on March 16, 2022. (PHOTO / XINHUA)
WASHINGTON – US employers hired more workers than expected in May and maintained a fairly strong pace of wage increases, signs of labor market strength that will keep the Federal Reserve on an aggressive monetary policy tightening path to cool demand.
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The Labor Department's closely watched employment report on Friday also showed the unemployment rate holding steady at 3.6 percent for a third straight month, even as more people entered the labor force. It sketched a picture of an economy that continues to expand, although at a moderate pace. The US central bank's interest rate hike campaign and tightening financial conditions have caused anxiety among investors about a recession next year.
The economy is miles away from being wrecked on the shores of recession with the economy continuing to hire workers at this fast of a clip. It is not slowing enough to put the inflation fire out. The Fed's work is not done.
Christopher Rupkey, chief economist at FWDBONDS in New York
"The economy is miles away from being wrecked on the shores of recession with the economy continuing to hire workers at this fast of a clip," said Christopher Rupkey, chief economist at FWDBONDS in New York. "It is not slowing enough to put the inflation fire out. The Fed's work is not done."
The survey of establishments showed that nonfarm payrolls increased by 390,000 jobs last month. Data for April was revised higher to show payrolls rising by 436,000 jobs instead of 428,000 as previously estimated. While May's job gains were the smallest in a year, they were way above the monthly average that prevailed before the COVID-19 pandemic in 2020.
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Employment now is just 822,000 jobs below its pre-pandemic level. Most industries with the exception of leisure and hospitality, manufacturing, healthcare, wholesale trade and local government education have recouped all the jobs lost during the pandemic.
The Fed is trying to dampen labor demand to tame inflation, with annual consumer prices increasing at rates last seen 40 years ago. There were 11.4 million job openings at the end of April, with nearly two positions for every unemployed person.
Stocks on Wall Street were lower. The dollar rose against a basket of currencies. US Treasury prices fell.
A man enters a subway station before a pizza shop and the Empire State building in central Manhattan, New York on April 12, 2021.
(ED JONES / AFP)
The Fed has increased its policy interest rate by 75 basis points since March. It is expected to hike the overnight rate by half a percentage point at each of its next meetings this month and in July. Fed Vice-Chair Lael Brainard said on Thursday she saw little case for pausing in September.
High inflation is eroding consumers' purchasing power and business investment, but economists argue that the economy's fundamentals are strong and that any downturn would likely be mild.