U.S. job growth accelerated far more than expected in May, keeping the Federal Reserve on track to hold off starting to cut interest rates until September at the earliest.
The Labor Department’s closely watched employment report on Friday also showed the unemployment rate ticked up to 4.0% from 3.9% in April, breaking a symbolic threshold below which the jobless rate had previously held for 27 straight months.
While the labor market has softened in recent months, its still-solid clip has allowed the Fed to take its time so far in deciding when to begin lowering borrowing costs.
Nonfarm payrolls increased by 272,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said. Revisions showed 15,000 fewer jobs created in March and April combined than previously reported. Economists polled by Reuters had forecast payrolls advancing by 185,000. Estimates ranged from 120,000 to 258,000.
The U.S. central bank is expected to leave its benchmark overnight interest rate unchanged next week in the current 5.25%-5.50% range, where it has been since last July.
There are some other signs though that the job market is beginning to loosen more steadily. The U.S. central bank is closely monitoring labor market conditions and economic growth to ensure it doesn’t keep rates too high for too long and overcool the economy as it tries to return inflation back to its 2% target.
Overall economic output in the first quarter grew at the slowest rate in nearly two years and data so far in the current quarter on balance has been weaker than expected.
Data earlier this week showed job openings declined in April and the number of available jobs per job-seeker reached its lowest level since June 2021.
