(June 5): US job growth topped all forecasts in May and the unemployment rate held steady, offering the clearest sign yet that the labour market may be breaking out of a prolonged period of lacklustre hiring.
Non-farm payrolls increased 172,000 last month after upward revisions to the prior two months, according to Bureau of Labor Statistics (BLS) data out on Friday. That marked the strongest three-month advance in more than two years.
The unemployment rate was unchanged at 4.3%, and average hourly earnings rose 0.3%.
The report suggests the labour market is firming after near-zero job growth last year, despite more recent concerns about rising energy prices that have driven consumer sentiment to a record low. The figures could put more pressure on the Federal Reserve to consider interest-rate increases in order to contain inflation.
Treasuries sold off, sending two-year yields up more than eight basis points to 4.12%. Interest-rate swaps showed that traders boosted their expectations for a Fed rate hike, with markets fully pricing in a quarter-point increase by year-end.
The advance in hiring was led by leisure and hospitality, which added 70,000 jobs, the most in more than three years. The healthcare and social assistance sector, which has been the primary driver of job growth over the last year, continued to hire at a firm pace.
See also: US producer prices rise at fastest pace since November 2022
Non-residential construction employment rose for a seventh month, likely fuelled by strong demand from the data centre buildout. A separate report this week showed construction spending on data centers eclipsed US$50 billion (RM200.52 billion) in April for the first time.
The manufacturing sector also added jobs in May. Recent reports have shown a pickup in US factory activity thanks to strong demand from data centres, defence production and broader stockpiling as customers have rushed to get ahead of additional war-related price increases.
Employment in air transportation fell by the most since 2020. The BLS said that was “largely reflecting a business closure,” a likely reference to the collapse of Spirit Airlines last month.
See also: US existing-home sales jump to highest this year, top forecasts
The report also contained signs of the ongoing impact of artificial intelligence (AI) on hiring. Employment in the information sector — which includes software publishers, social networks and web search portals — fell again in May, for the 16th time in the last 17 months. Big Tech companies like Meta Platforms Inc and Microsoft Corp are reducing headcount, in part to offset heavy spending on AI.
The US economy still faces potential headwinds in the months to come, especially if the Middle East conflict isn’t resolved soon and the Strait of Hormuz remains mostly shuttered, keeping oil prices elevated.
In that scenario, consumer spending could come under more pressure as budgets get tighter — especially in lower-income families. A pullback in the stock market could dent spending among wealthier households, and ongoing deployment of AI by businesses could pose a larger threat to hiring trends as the year goes on.
Uploaded by Felyx Teoh
