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Job Growth in the US beats expectations in May, but unemployment rate still at rise
Employment in the US has increased more than it was expected in May. However, a moderation in wages has the potential to allow the Federal Reserve to skip an interest rate hike this month for the very first time. This is since embarking on the aggressive policy that tightened the campaign more than a year ago.
Nonfarm payrolls have increased by 339,000 jobs in April. The Labor Department has stated that it has closely monitored employment reports on Friday. The data for April has been revised to show payrolls rising by 294,000 jobs instead of 253,000 as previously reported.
Economists who have been polled by Reuters gave a forecast regarding payrolls increasing by 190,000. However, even with strong hiring, the unemployment rate rose to 3.7% from a 53-year low of 3.4% in April.
Moreover, wage pressures are also subsiding, which should offer some comfort to Federal officials battling to bring inflation back to the US central bank’s 2% target. Average hourly earnings have gained 0.3% after rising 0.4% in April. This lowered the year-on-year increase in wages to 4.3% after increasing by 4.4% in April. Moreover, annual wage growth averaged about 2.8% prior to the pandemic.
The report showcases the labor market has remained strong and offers more proof that the economy has been far away from a dreaded recession, though the pockets of weakness have been on the rise.
Despite large layoffs in the IT sector after organizations mass hired during the COVID-19 and the pull from high borrowing costs on housing and manufacturing, the service sector has been struggling to find workers over the last two years. On the other hand, industries like healthcare and education have also experienced accelerated retirements.
Further, the backfilling of these retirements and the increase in demand for services are some factors that drove job growth in the US.
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