U.S. labor market still impervious to inflation, interest rate hikes

A “Now hiring!” sign is pictured on the door to Michaels in Salt Lake City on Jan. 6, 2023. The U.S. jobs market has continued robust growth in 2023, according to reports.
A “Now hiring!” sign is pictured on the door to Michaels in Salt Lake City on Jan. 6, 2023. The U.S. jobs market has continued robust growth in 2023, according to reports. | Kristin Murphy, Deseret News

A historically robust U.S. jobs market, one that’s proven resilient to the downward pressure of ongoing inflation and a series of Federal Reserve rate hikes aiming to cool down the economy in general and job growth in specific, kept its mojo intact in May as businesses continued to grow their employment roles.

The U.S. Labor Department’s Employee Situation Survey for May, released Friday, found that employers added 339,000 new, non-farm positions last month, a number that blew by a pre-report estimate from Dow Jones that had the rate coming in just under 200,000. The May hires also come very close to the 342,000 new jobs per month average over the last 12 months.

Average wages for U.S. workers also saw a month-to-month increase of .3% in May and annual wage growth came in at 4.3%. The average hourly wage for workers on non-farm payrolls was at $33.44 last month.

While job and wage growth remained on solid footing in May, the national unemployment rate ticked up to 3.7% last month from April’s four decade low of 3.4%.

“The U.S. labor market continues to demonstrate grit amid chaos — from inflation to high-profile layoffs and rising gas prices,” Becky Frankiewicz, president and chief commercial officer of Manpower Group, told CNBC. “With 339,000 job openings, we’re still rewriting the rule book and the U.S. labor market continues to defy historical definitions.”


Last month, the Federal Reserve levied a .25% increase to its benchmark lending rate, the 10th straight increase going back more than a year.

The May 3 decision by the Fed’s Open Market Committee lifted the target range for the federal funds rate to 5%-5.25%. The decision came just days after San Francisco-based First Republic Bank became the third major U.S. bank failure since March. In its announcement of the rate adjustment, the Fed said it believed the U.S. banking system is “sound and resilient” but also noted tighter credit conditions for households and businesses “are likely to weigh on economic activity, hiring and inflation” in the coming months.

Friday’s jobs data will be carefully considered by the Fed but it comes alongside a set of disparate economic signals that include a recent U.S. GDP report that found the overall U.S. economy in a slowdown and consumer inflation that’s still running well above the Fed’s target rate of 2%.

According to the Labor Department’s Consumer Price Index Summary released last month, overall inflation for April came in at 4.9%, a tick below March’s 5.0% year-over-year rate but prices on consumer goods and services were up .4% from the previous month. Core inflation, which strips out volatile food and energy costs, was at 5.5% in April compared to the same time last year, down from March’s 5.6% annual rate.

The Federal Reserve’s 10 consecutive rate hikes have been its primary weapon in an ongoing battle against the elevated prices of consumer goods and services and represents the monetary body’s most aggressive series of increases in decades. The monetary body has now moved its federal funds rate some 500 basis points from the near zero mark it was at in March 2022.

The Fed has projected that its rate hikes will weaken the economy and raise unemployment, though Chair Jerome Powell has held out hope that the central bank could curb inflation without causing a deep recession.

“The continued strength in employment pushes back the start of a prospective recession but does not eliminate that likelihood,” Kathy Bostjancic, chief economist at Nationwide told The Associated Press. “And if the economy remains too hot to meaningfully slow inflation, the Fed will simply raise rates higher, still a path towards a downturn.”