US labour market defies forecasts with 172,000 May payrolls
Economists had predicted 88,000 new roles, but the US economy added 172,000 in May, with significant contributions from leisure, hospitality, and local government sectors.
The US economy added 172,000 jobs in May, significantly surpassing economist forecasts of 88,000, according to the government’s closely watched employment report. The unemployment rate remained unchanged at 4.3%, while the breadth of new hiring suggests a labour market that is more resilient than anticipated. April’s figure, which had already exceeded expectations, was revised upwards to 179,000 from the previously reported 115,000, and March’s data was updated to 214,000.
Payroll growth was notably broad-based, moving away from the healthcare-led expansion that had characterised recent months. Leisure and hospitality sectors added 70,000 jobs, while local governments contributed 55,000 positions. Healthcare employment grew by approximately 35,000, indicating a diversification in the sources of labour demand across the economy.
Despite the strong headline numbers, concerns regarding purchasing power persist. Average hourly earnings grew by 3.4% year-on-year, a rate that lags behind the current pace of inflation. Heather Long, chief economist at Navy Federal Credit Union, noted on X that while it is easier to secure employment, finding roles where pay keeps up with rising costs remains difficult for many workers.
Sector-specific data highlights the nature of this wage-pressure dynamic. Food services and drinking places added 48,000 jobs in May, yet average hourly earnings in that industry stand at $21.86. A Bank of America Institute analysis released this week corroborated these trends, suggesting that much of the recent payroll strength is being driven by gains in lower-income roles rather than high-wage sectors.
Private sector data from ADP showed 122,000 jobs added in May, with hiring occurring across eight of the ten supersectors tracked. However, the Federal Reserve’s Beige Book for May described a “low-hire, low-fire environment” in 11 of its 12 districts. The report indicated that workers are increasingly reluctant to change jobs due to economic uncertainty, with hiring remaining selective and focused on critical roles or attrition replacement.
