Jobs report blows past expectations, displaying resilient strength of US economy
Written by ABC AUDIO on June 7, 2024
(NEW YORK) — A better-than-expected jobs report on Friday displayed the resilient strength of the U.S. economy, even after years of high interest rates and stubborn inflation.
Employers hired 272,000 workers last month, blowing past economist expectations of 190,000 jobs added, U.S. Bureau of Labor Statistics data showed. The unemployment rate ticked up to 4%, reaching that level for the first time since January 2022.
The hiring exceeded the average number of jobs added each month over the previous year, and it accelerated notably from the 175,000 jobs added in April.
The blockbuster report defies the nation’s flagging economic growth. Gross domestic product slowed significantly at the outset of this year, suggesting that the prolonged policy of high interest rates had weighed on business investment and economic activity.
“The May jobs report was strong across the board,” Bret Kenwell, an investing analyst at eToro, told ABC News in a statement.
In theory, high interest rates depress consumer demand and slow price increases. Inflation has fallen significantly from a peak of 9.1%, but it remains more than a percentage point higher than the Fed’s target rate of 2%.
That economic slowdown appeared to manifest in a dip in job openings reported earlier this week. Job openings fell in April to the lowest level since February 2021, BLS data on Tuesday showed.
However, the labor market surprised observers on Friday with a burst of hiring that improves the economic outlook but may complicate the Fed’s decision next week on a possible interest rate cut.
The Fed risks a rebound of inflation if it cuts interest rates too quickly, since stronger consumer demand on top of solid economic activity could lead to an acceleration of price increases.
Average hourly wages surged 4.1% over the year ending in May, the fresh data on Friday showed. That rate of pay increase exceeds the pace of inflation, indicating that the spending power of workers has grown even as prices jump.
The data marks a boon for workers but could give pause to policymakers, since they fear that a rise in pay could prompt businesses to raise prices in order to cover the added labor cost.
“Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut,” Seema Shah, chief global strategist at Principal Asset Management, told ABC News in a statement.
The major stock indexes fell slightly in pre-market trading in response to the jobs report.
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