U.S. adds a much-better-than-expected 272,000 jobs in May, but unemployment rate edges up to 4%

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Nonfarm payrolls expanded by 272,000 for the month, up from 165,000 in April and well ahead of the Dow Jones consensus estimate for 190,000. The unemployment rate rose to 4%, the first time it has breached that level since January 2022. Job gains were concentrated in health care, government, and leisure and hospitality, consistent with recent trends. Average hourly earnings were higher than expected as well, rising 0.4% on the month and 4.1% from a year ago.

The U.S. economy added far more jobs than expected in May, countering fears of a slowdown in the labor market and likely reducing the Federal Reserve’s impetus to lower interest rates.

Nonfarm payrolls expanded by 272,000 for the month, up from 165,000 in April and well ahead of the Dow Jones consensus estimate for 190,000, the Labor Department’s Bureau of Labor Statistics reported Friday.

At the same time, the unemployment rate rose to 4%, the first time it has breached that level since January 2022. Economists had been expecting the rate to stay unchanged at 3.9% from April.

The increase came even though the labor force participation rate decreased to 62.5%, down 0.2 percentage point. The survey of households used to compute the unemployment rate showed that the level of people who reported holding jobs fell by 408,000.

“On the surface, [the report] was hot, but you’ve also got a bigger drop in household employment,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “For what it’s worth, that tends to be a more accurate signal when you’re at an inflection point in the economy. You can find weakness in the underlying numbers.”

A more encompassing unemployment figure that includes discouraged workers and those holding part-time jobs for economic reasons held steady at 7.4%.

The household survey also showed that full-time workers declined by 625,000, while those holding part-time positions increased by 286,000.

Job gains were concentrated in health care, government, and leisure and hospitality, consistent with recent trends. The three sectors respectively added 68,000, 43,000 and 42,000 positions. The three sectors accounted for more than half the gains.

A Now Hiring sign hangs near the entrance to the PetSmart store on December 03, 2021 in Miami, Florida. Joe Raedle | Getty Images

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The full article is available here. This article was published at CNBC Economics.