U.S. Nonfarm Payrolls Rose by 172,000 in May, Surpassing Expectations

U.S. nonfarm payrolls increased by 172,000 in May, a figure that considerably outpaced the consensus expectation of an 88,000 gain. This strong performance was further bolstered by upward revisions to March and April payroll figures, adding an collective 93,000 jobs and resulting in a net gain of 265,000 positions for the month inclusive of revisions. This suggests a more resilient labor market than previously estimated, potentially influencing monetary policy outlooks.

Private sector payrolls contributed 120,000 to the May total, alongside an upward revision of 66,000 to prior months. Key growth sectors included leisure and hospitality, which added 70,000 jobs, health care and social assistance with an increase of 47,000, and construction, which saw a rise of 17,000. Manufacturing employment also edged up by 7,000. Government employment expanded by 52,000, contributing to the overall payroll growth. These sectoral gains indicate broad-based strength in the labor market.

The unemployment rate remained unchanged at 4.3% in May. This stability occurred as the labor force—comprising individuals working or actively seeking employment—grew by 83,000, absorbing the employment gains. Civilian employment, an alternative measure that includes small-business startups and can be subject to monthly volatility, rose by 149,000. This metric is a valuable indicator of broader employment trends, including entrepreneurial activity.

Average hourly earnings saw a 0.3% increase in May, bringing the year-over-year growth to 3.4%. While this represents an increase in wages, it likely struggled to keep pace with the recent, albeit potentially temporary, uptick in inflation. Aggregate hours worked also edged up by 0.1% in May, contributing to a 0.9% increase from a year ago. Looking ahead, continued job gains are anticipated, though potentially at a more moderate pace than observed in May. In related labor market news, initial jobless claims registered at 225,000 last week, an increase of 13,000 but still indicative of a low level of layoffs, while continuing claims declined by 8,000 to 1.777 million.

Key terms:

1. **Nonfarm payrolls**: A measure of the total number of paid U.S. workers, excluding farm employees, private household employees, and non-profit organization employees. It is a key indicator of job creation and economic health.

2. **Unemployment rate**: The percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

3. **Average hourly earnings**: A measure of the average amount of money earned per hour by employees before taxes and deductions, excluding irregular bonuses and commissions. It indicates wage growth and consumer purchasing power.