Job gains maintained their impressive run in May, even as government policymakers took steps to cool the economy and ease inflation.
The Labor Department reported Friday that employers added 390,000 jobs, the 17th straight monthly gain.
The unemployment rate was 3.6 percent for the third straight month, near a half-century low. Average hourly earnings for employees rose by 10 cents, or 0.3 percent on a monthly basis, and were 5.2 percent higher than a year earlier.
Job growth was broad and led by the leisure and hospitality sector, as consumers continued to pivot their spending habits away from goods and toward services like travel, dining, and entertainment.
The deficit in overall employment compared with pre-pandemic levels is about 800,000.
“We’re in the homestretch here — we could be about two months from being at the employment level that we had in pre-pandemic times in February 2020,” said Andrew Flowers, a labor economist at Appcast, a firm that helps companies target their online recruitment efforts.
Record levels of consumer spending, which makes up about 70 percent of the economy, have driven business expansion and job creation, as companies try to keep up with demand for a wide variety of goods and services. The hiring push has lent some workers a degree of agency regarding pay and conditions that is unfamiliar to both job seekers and employers.
But the Federal Reserve is worried that rising labor costs will be passed along to consumers, constraining efforts to bring down inflation, which is near a 40-year high.
Last month, Fed Chair Jerome Powell stressed that his institution’s attempts to cool off prices were a part of ensuring a more sustainable form of full employment. “We’ve got to get back to price stability so that we can have a labor market where people’s wages aren’t being eaten up by inflation,” he said. “And where we can have a long expansion, too.”
Throughout the year, price increases and general volatility in the economy have created a dissonance between sour consumer sentiment and relatively positive raw data. Checking accounts are still above 2019 levels for nearly all income groups. And the amount of households under duress as a result of debt burdens is historically low. New bankruptcies and debt-collection proceedings are both at their lowest level since tracking began in 1999.
For some economists, Friday’s report is early evidence that the Fed’s ambitious plan for engineering a modest economic slowdown that avoids a painful recession could be possible to achieve. The Labor Department announced Wednesday that layoffs were at a record low. But it also showed that the large gap between job openings and job seekers has narrowed.
“Businesses with high profitability, easy access to capital, the capacity to automate, and pricing power are still eager to hire,” said Bill Adams, chief economist at Comerica Bank, a large commercial bank based in Texas. “But businesses that are seeing their margins squeezed by rising costs, like hospitality, or that are seeing demand soften, like retail, are pulling job postings as their outlook softens. And competition for workers is squeezing lower-paying employers out of the job market.”