Hiring surged well beyond all expectations in May

Do you want to take the number of jobs predicted by analysts to be added for May? Or double it and pass it along? The Labor Department did the latter, announcing yesterday that the US added a seasonally adjusted 172,000 jobs last month, well above expectations of ~80,000 from Dow Jones. It’s a good sign that the labor market has been steadily emerging from an earlier slump, despite continued concerns about inflation, oil prices, and the impact of AI.Yesterday’s jobs report also positively revised the figures for March (up by 29,000 to 214,000) and April (up by 64,000 to 179,000), raising the three-month average to 188,000 jobs gained—a two-year high.Where did May’s new jobs come from? Mostly, the FIFA World Cup:Leisure and hospitality added 70,000 jobs with the tournament taking place in 11 US cities starting next week, fueling hiring in bars, restaurants, and hotels.The local government sector also gained 55,000 jobs—possibly reflecting hiring for security and entertainment roles (and more people to check $100 tickets on train rides to stadiums), an economist told Bloomberg.And now…the bad newsYou didn’t think we’d send you into the weekend with a jobs report story that didn’t have a few red flags, did you?Unemployment: The rate held at 4.3%. But the number of people without jobs for 27 weeks or longer climbed to 27.5% in May—the highest it’s been since December 2021.Earnings vs. inflation: Average hourly earnings rose 3.4% in May compared to a year earlier. However, with inflation up 3.8% over the year, lower-income Americans are likely feeling a price squeeze.What’s next? Persistent inflation and a surprisingly strong jobs report make a quarter-point Fed interest rate hike by the end of the year more likely than a cut, per FedWatch—odds that sent the stock market plunging yesterday. Plus, if oil prices remain high, low-income consumers may tighten their purse strings, and even wealthier Americans could start to tighten their Hermès belts, too.—DL