What to know about the latest jobs report. (2024)

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What to know about the latest jobs report.

Here’s what to know:

• Services powered the gains: Health care again accounted for the most job growth, adding 68,000 jobs. Government hiring rebounded from April, with 43,000 additional jobs, as did leisure and hospitality work, with 42,000.

• Wages were strong: Average hourly earnings rose 0.4 percent, or 4.1 percent from a year earlier. That was also stronger than expected, since wage increases have been easing since early 2022. Wage growth isn’t the primary reason that inflation has been high, but economists worry that it will be difficult to bring inflation fully under control if pay keeps rising at its recent pace.

• But the unemployment rate rose: The jobless rate hit 4 percent for the first time since January 2022, ending one of the longest streaks of sub-4 percent unemployment on record.

• A mixed message: The household survey, from which the unemployment rate is drawn, flashed warning signs, showing 408,000 fewer people working in May than in April. That data has been out of joint for some time with the survey of employers, from which the job growth figure is tallied, suggesting revisions down the line.

• What it means for the Fed: The report was not what Federal Reserve officials have been hoping for: They would like to see slowing job and wage growth and continued low unemployment. Instead, the report showed accelerating job and wage growth and rising joblessness. In the end, the data is unlikely to affect the Fed’s decision next week on interest rates, when most economists expect policymakers to leave rates unchanged.

• What it means for the White House: The headline jobs number is a source for celebration for President Biden, who frequently points to the strong job market when making the case to voters that he has handled the economy well. But Mr. Biden is trailing in the polls, possibly indicating that Americans care more about high prices than they do about plentiful jobs.

• How markets reacted: Stocks slipped and government bond yields rose as the report raised concerns that inflation’s gradual decline could yet stall. That has led investors to slash bets on the Fed cutting interest rates in the near future, implying that historically high rates will continue to weigh on the economy for many months to come.

This jobs report sent unusually mixed signals. Here’s how.

Instead, the data released by the Labor Department on Friday was a mess of conflicting signals. It couldn’t even agree on the most basic of questions: whether the economy is adding or losing jobs.

The report showed that employers added 272,000 nonagricultural jobs in May, far more than forecasters were expecting. That figure is based on a survey of about 119,000 businesses, nonprofit organizations and government agencies.

But the report also contains data from another survey, of about 60,000 households. That data showed that the number of people who were employed last month actually fell by 408,000, while the unemployment rate rose to 4 percent for the first time in more than two years.

The two surveys measure slightly different things. The employer survey includes only employees, for example, while the household survey includes independent contractors and self-employed workers. But that doesn’t explain the discrepancy last month: Adjusting the household survey to align with the concepts used in the employer survey makes the job losses in May look larger, not smaller.

That means that the conflicting pictures come down to some combination of measurement error and random noise. That is frustrating but not unusual: Over the long term, the two surveys generally tell similar stories, but over shorter periods they frequently diverge.

Economists typically put more weight on the employer survey, which is much larger and is generally viewed as more reliable. But they aren’t sure which data to believe this time around. Some economists have argued that the household survey could be failing to capture fully the recent wave of immigration, leading it to undercount employment growth. But others have argued that the employer survey could be overstating hiring because it isn’t accounting properly for recent business failures, among other factors.

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But the president went on to stress his efforts to bring down prices, a nod to the high inflation that continues to weigh on voters.

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Wage growth exceeds forecasts, potentially deterring Fed rate cuts.

The jobs report released Friday carried bad news on all fronts.

Hiring and wage growth both accelerated in May, according to the report. That could add to fears that the labor market remains too hot to bring inflation fully under control.

But unemployment rose slightly, hitting 4 percent for the first time in more than two years. That suggests high interest rates could be starting to take a toll in the form of increased job losses.

Policymakers will meet next week to weigh the economy’s conflicting signals. They are widely expected to leave interest rates unchanged at about 5.3 percent, their highest level in decades. The same is true for their next meeting, in July.

What happens after that is much less certain. Investors think there is about a 50 percent chance that the Fed will cut rates at its September meeting, but those odds have steadily worsened in recent months as inflation has proved more stubborn than policymakers had hoped.

Fed officials are paying particularly close attention to wage growth, which has fallen since the frenzied days of 2021, when businesses were trying to rapidly hire workers as the economy reopened from the pandemic. But pay is still rising significantly faster than before the pandemic, and while policymakers don’t believe that is a primary cause of recent price increases, they are concerned that it will be hard to bring inflation fully under control unless wage growth slows further.

“If you have wage increases running higher than productivity would warrant, then there will be inflationary pressure,” Jerome H. Powell, the Fed chair, said at a news conference after the central bank’s last meeting, in May. He said that policymakers had “seen progress” on wages but that “we have a ways to go on that.”

The data released on Friday showed that average hourly earnings, a measure of wage growth, rose 4.1 percent in May from a year earlier. The pace was faster than in April, and faster than forecast. That, combined with job growth that was also much stronger than expected, could make Fed officials more concerned about the job market remaining too hot — and therefore more reluctant to cut interest rates.

But the increase in unemployment could give some policymakers pause. So far, the Fed’s campaign of rate increases has brought remarkably little pain in the form of job losses, and the unemployment rate remains low even after the slight uptick in May. But historically, once the unemployment rate rises even modestly, it tends to keep rising.

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Most of the immediate reactions from analysts in my inbox welcomed the strength of the labor market but worried about strong wage growth. Together, they are likely to keep the Fed from cutting rates in the immediate future.

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Most economists don’t think that wage growth was a primary cause of the inflation of the past few years. But they do worry that it will be difficult to bring inflation fully under control if pay keeps rising at its recent pace.

Over time, the two surveys tend to tell consistent stories. But in any one month, they can diverge and it can be hard for economists to know which signal to believe.

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The president will be less happy with the slight uptick in unemployment. But the real question for his economic team is, what does this report mean for the Fed — and is it likely to help delay interest rate cuts until after the presidential election in November, at earliest?

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Demand for summer help appears to be strong.

“You need more staff to serve the ever-expanding needs of the children, and you need more backup staff to provide a really solid, safe, high-quality experience,” Mr. Rosenberg said.

To recruit quality candidates, camp directors are pitching the job-training aspect of being a counselor, which can help with an entry-level position after graduation. And it may be working: More job-seekers are coming to the organization’s portal for job listings.

Many of those jobs are typically taken by students while they’re off from school — and in the tight labor market of the last few years, more teenagers have landed positions.

The share of 16- to 19-year-olds who are working fell in the early 2000s, and again later in the decade, as summer priorities like sports and extracurricular academic programs became more popular. But the percentage rebounded after the recession of 2009, along with most other age groups.

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Markets are poised to take a jobs slowdown in stride.

Investors added to bets on how soon the Fed could lower interest rates after data on Tuesday showed job openings fell to their lowest level since in more than three years.

Investors still expect the Fed to begin cutting interest rates in September but have increased bets that it will opt to start sooner, in July. Other central banks around the world have already begun to lower rates, including the Bank of Canada on Wednesday and the European Central Bank on Thursday. Analysts at Citigroup and JPMorgan Chase are among those predicting a July move by the Fed. (Fed policymakers meet next week to set rates, but most analysts believe they will leave rates unchanged.)

Some investors have noted that other data on the U.S. labor market, such as the employment component of recent manufacturing surveys and the number of people voluntarily leaving jobs, have signaled that the economy might be starting to buckle.

That’s part of the reason that the government’s monthly release of jobs data has become one of the most closely watched releases on investors’ radar, deemed vital for assessing the path of inflation and interest rates.

With investors and economists already expecting a further slowdown in the number of new jobs added in May, and more data to come before the Fed meets in July, some analysts said it would take a big surprise to get a strong market reaction.

Already this week, Nvidia and Microsoft, both beneficiaries of the boom in artificial intelligence whose growth is aided by lower interest rates, led the S&P 500 to a new high.

Nvidia on Wednesday became the third company, after Apple and Microsoft, to have a market value above $3 trillion, and briefly became worth more than Apple before inching lower on Thursday. Microsoft remains the mostly highly valued company in the United States, at $3.2 trillion.