WASHINGTON — U.S. employers added 390,000 jobs in May, extending a strong hiring streak that has supported an economy under pressure from high inflation and rising interest rates.
Last month’s gain reflects a resilient labor market that has so far ignored fears that the economy will weaken in the coming months as the Federal Reserve steadily raises interest rates to fight inflation . The jobless rate remained at 3.6%, just above a half-century low, the Labor Department said Friday.
May’s job growth, while healthy, was the weakest monthly gain in a year. But it was high enough to keep the Fed on track to continue what will likely be the fastest round of rate hikes in over 30 years. Stock indices fell on Friday after the government released the jobs report, reflecting that concern.
Companies in many sectors are desperate to hire because their customers have continued to spend freely despite growing concerns about high inflation. Americans’ finances have been boosted by rising wages and an unusually large pool of savings accumulated during the pandemic, especially by high-income households.
“Given all the talk we’ve heard about the recession and economic headwinds, it was very reassuring to see solid job numbers,” said Mark Vitner, senior economist at Wells Fargo.
An encouraging sign, Vitner said, was that hiring was widespread across most of the economy.
“When the economy loses momentum,” he said, hiring tends to happen in just a few sectors, “and that’s not what we’re seeing today.”
Almost all major industries added workers in May. A major exception was retail, which lost nearly 61,000 jobs. Some major retailers, including Walmart and Target, reported disappointing sales and profits. Last month, Walmart said it overhired and then reduced its workforce through attrition.
Construction companies have created 36,000 jobs, a sign of hope for Americans who have bought new homes that have yet to be built due to labor and parts shortages. Shipping and warehousing companies, still struggling to keep up with the growth of e-commerce, added 47,000 jobs. Restaurants, hotels and entertainment venues hired 84,000 people.
Last month, according to Friday’s report, more Americans withdrew from the labor force and found jobs, a sign that rising wages and plentiful opportunities are encouraging people to look for work. Yet the proportion of people who have a job or are looking for one remains below pre-pandemic levels.
Rising prices may also have led some to take jobs: The number of people aged 55 or older who are working rose last month, suggesting that some older Americans are not retiring after quitting their jobs – or have been laid off – during the pandemic and its aftermath.
The average hourly wage rose 10 cents in May to $31.95, the government said, a solid gain but not enough to keep up with inflation. Compared with 12 months earlier, hourly wages rose 5.2%, down from a 5.5% year-over-year gain in April and the second consecutive decline.
Nonetheless, more moderate wage increases could ease inflationary pressures in the economy and help support growth.
Workers, in general, enjoy almost unprecedented bargaining power. The number of people leaving their jobs, usually for better, better paid positions, has reached or is approaching a six-month high. Layoffs are at their lowest level on records dating back 20 years.
Still, there are signs that some companies, faced with rising parts and labor costs, are beginning to resist demands for higher wages.
One such leader is Jackie Bondanza, CEO of Hounds Town, a chain of dog daycares with 30 locations in 14 states. Bondanza said people were applying for jobs at the company’s headquarters in Garden City, New York, which didn’t necessarily have relevant experience but required a higher salary than listed.
“People come in asking for 30% more,” she said. “We can’t afford to overpay for someone.”
Even so, Bondanza plans to continue hiring to support the company’s expansion. Hounds Town, which plans to open 50 new franchise outlets over the next 18 months, is looking to fill three positions, including a training manager and a marketing manager. The company now has 17 employees at its headquarters, up from five a year ago.
Inflation, she said, has yet to deter most customers from seeking the company’s services, which include daily dog care and boarding.
“We see more dogs in our facilities than some of our stores know what to do with,” Bondanza said.
Tom Gimbel, chief executive of the LaSalle Network, a staffing firm in Chicago, said his corporate clients are always eager to hire and offer solid compensation to new employees. But they are also more selective about job applicants.
After making it clear to companies in the aftermath of the pandemic that they should pay more, he said, his company is now starting to warn job seekers that they may not get the huge raises they seek. , given the higher costs of many companies. are struggling with.
“We’re now coming to a healthier, more normalized place,” Gimbel said.
A report by Reuters on Friday said Tesla Chief Executive Elon Musk was considering laying off 10% of the company’s workers, sending its shares plummeting. Musk also voiced his concerns about the economy in an email to executives in which he said to “suspend all hiring globally.”
By contrast, on Thursday, Ford Motor Co. said it plans to create 6,200 jobs in three states over the next few years as part of its electric vehicle production expansion.
Nationally, the strength of the domestic labor market is contributing to inflationary pressures. As wages continue to rise across the economy, companies are passing on at least some of their increased labor costs to their customers in the form of higher prices. The costs of food, gasoline, rent and other items — which fall disproportionately on low-income households — are accelerating at nearly the fastest rate in 40 years.
Inflation had started to soar last year as growing demand for cars, furniture, electronic equipment and other physical goods came up against overstretched supply chains and shortages of rooms. More recently, prices for services such as airline tickets, hotel rooms and restaurant meals have jumped as Americans shift more of their spending to these areas.
In an attempt to cool spending and slow inflation, the Fed last month hiked its short-term rate by half a point, its biggest hike since 2000, to a range of 0.75% to 1%. . Two more half-point rate hikes are expected this month and in July. And some Fed officials have suggested in recent speeches that if inflation shows no signs of slowing, they could implement another half-point hike in September.
The Fed’s actions have already raised mortgage rates sharply and contributed to lower sales of new and existing homes. The rate hikes have also amplified borrowing costs for businesses, which may respond by reducing investment in new buildings and equipment, slowing growth.