US employers hired at a robust clip in May while wage gains held firm, suggesting the economy continues to power forward as the Federal Reserve raises interest rates at a steep pace to tame red-hot inflation.
Nonfarm payrolls increased 390,000 last month after a revised 436,000 gain in April, a Labor Department report showed Friday. The unemployment rate held at 3.6%, and the labor force participation rate crept higher.
The median estimate in a survey of economists called for a 318,000 advance in payrolls and for the unemployment rate to fall to 3.5%.
The report suggests that employers had success filling open positions in the month. It also potentially provides some broader reassurance that the economy can achieve a soft landing as wage gains moderate from their more rapid pace of most of 2021.
Average hourly earnings rose a less-than-forecast 0.3% from April, the same as the previous month. They were up 5.2% from a year earlier, a slowdown from 5.5% in April.
Treasuries extended losses and stocks fell as a traders considered the report as a sign that Fed will keep its policy tightening on track.
The Fed has adopted a more aggressive monetary policy stance in an effort to curb decades-high inflation, and has indicated that it will raise rates by a half point in both June and July. While those efforts are likely to ease price pressures, they also risk eventually leading to softer demand for labor.
Job growth in May was led by steady hiring in leisure and hospitality, business services, and education and health care.
Retail trade, however, suffered a 60,700 decrease in payrolls in a relatively broad decline across various categories. Even with the drop, retail employment remains above pre-pandemic levels.
The labor force participation rate — the share of the population that is working or looking for work — rose to 62.3%, and the rate for workers ages 25-54 climbed to a pandemic-high of 82.6%.
Overall participation has been slow to recover to pre-pandemic levels after many Americans left the workforce for good during the pandemic, in part due to child care challenges and early retirement.