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May jobs report: Payrolls rise by 390,000 as unemployment holds at 3.6%

The U.S. labor market remained hot in May, even as tighter monetary conditions and persistent inflation stoke worries of an economic slowdown.

The economy created 390,000 news jobs last month with the unemployment rate holding steady at 3.6%.

Here are the key numbers from the Labor Department's latest report compared to consensus estimates compiled by Bloomberg:

  • Nonfarm payrolls: +390,000 vs. +318,000 expected and a revised +436,000 in April

  • Unemployment rate: 3.6% vs. 3.5% expected and 3.6% in April

  • Average hourly earnings, month-over-month: +0.3% vs. +0.4% expected and +0.3% in April

  • Average hourly earnings, year-over-year: +5.2% vs. +5.2% expected and +5.5% in April

The latest data reflects a slightly slower pace of hiring from April, which saw payrolls rise by a revised 436,000. Over the last three months job gains have now averaged 408,000; in the three-month period ended in April, nonfarm payroll growth averaged 516,000.

Although growth slightly abated in May, overall job growth remains robust on a historical basis. Throughout 2019, for instance, payroll growth averaged about 164,000 per month.

Prior to the May report, the U.S. economy had added at least 400,000 jobs each month over the last year, bringing employment within 1% of pre-pandemic levels.

May’s jobs report also came as investors look for signs of continued economic momentum amid mounting worries over rising costs and the specter of recession.

"Another month of solid job growth in May is further evidence that the U.S. economy was not in a recession in the spring," Comerica Chief Economist Bill Adams said in a note. "Americans continue to return to the labor force as the rising cost of living pressures household finances."

At the industry level, employment in the retail sector notably softened in May, falling by 61,000 with job losses primarily across general merchandise stores, clothing, and clothing accessories stores. The declines coincide with some recent earnings reports from some big-name retailers that suggested hiring may cool as companies grapple with rising costs due to inflation. Overall employment in the retail industry, however, remains 159,000 jobs above its February 2020 level.

Services-based employers again led gains in May, with companies rushing hire back workers let go during the pandemic to meet renewed demand as consumers return to in-person activities, with notable hiring across restaurants and accommodations. Employment in the leisure and hospitality industry increased by 84,000, rising from 78,000 in April. This growth was the largest among any industry in May.

Transportation and warehousing gains were also a standout in the May jobs report, with 47,000 jobs added last month. This growth, however, marked a slight decrease from the 52,000 jobs created by the industry in April.

Meanwhile, the unemployment rate held steady in May at 3.6%, slightly above February 2020's level of 3.5% before the pandemic tipped the economy into recession. Economists had looked for the headline unemployment rate to return to 3.5%, according to Bloomberg consensus estimates, which would match the lowest level for joblessness since 1969. The labor force participation ticked slightly higher to 62.3% in May.

With the labor market at a near-full recovery and inflation running hot, attention turns to the Federal Reserve’s efforts to normalize surging price levels.

An unusually tight labor market has been the focal point of policymakers, with the imbalance between job openings and available workers placing upward pressure on wages and adding to inflationary pressures. On a month-over-month basis, average hourly earnings rose by 0.3%, on par with gains seen in April.

Still, wage growth is trailing inflation by a substantial margin, and serves as a "fresh reminder of how inflation is sapping household buying power," Bankrate Chief Financial Analyst Greg McBride said in a note.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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