Employers added 390,000 jobs in May; unemployment rate remains unchanged

Employers added 390,000 jobs in May, signaling a slight slowdown in the U.S. job market that for months has been on a tear.

Analysts were expecting 325,000 to 328,000 new payrolls, according to forecasts.

The unemployment rate remained unchanged at 3.6 percent.

The data comes as pressure has grown on the Federal Reserve and the Biden administration to fight inflation, even if that means slowing down the broader economy. The central bank has already taken steps to tighten the purse strings, in part by raising interest rates in March and in May.

Earlier this week, President Joe Biden signaled support for the Fed’s current policy stance, saying he would respect its independence. Biden also published an op-ed in The Wall Street Journal laying out additional steps for curbing price growth, including urging Congress to enact legislation that would lower Americans’ home energy bills and alleviate disrupted supply chains.

While the price of food and gas remain closely tied to global markets, the Fed has looked to cool off a red-hot labor market that has caused wages to surge — and thus sending overall prices higher — while creating worker shortages.

This week, the Fed got some signs that its two recent rate hikes may already be paying off. The rate of workers quitting leisure and hospitality jobs fell to its lowest level since February 2021, something that is already translating to slower wage growth in that sector, according to Capital Economics research group.

Still, the job market remains heavily tilted toward workers. Another survey out this week showed 51 percent of American small businesses had roles they couldn’t fill last month — a record, according to data from the National Federation of Independent Business. As a result, there is little to suggest the Fed will pull back on its plan to implement two more rate hikes of 0.5 percent this summer, Capital Economics’ Senior U.S. Economist Michael Pearce wrote in a note to clients.

“We suspect it will take at least a few months before we start to see ‘clear and convincing’ signs of a moderation in wage and therefore price pressures that would prompt the Fed to switch back to [0.25 percent] rate hikes,” he said.