By CHRISTOPHER RUGABER (AP Economics Writer)
WASHINGTON (AP) — The nation’s employers stepped up their hiring in May, including a strong 339,000 jobs, properly above expectations and proof of putting up with energy in an financial system that the Federal Reserve is desperately making an attempt to chill.
Friday’s report from the federal government mirrored the job market’s resilience after greater than a 12 months of aggressive rate of interest will increase by the Fed. Many industries, from building to eating places to well being care, are nonetheless including jobs to maintain up with shopper demand and restore their workforces to pre-pandemic ranges.
Overall, the report painted a principally encouraging image of the job market. Yet there have been some combined messages within the May figures. Notably, the unemployment fee rose to three.7%, from a five-decade low of three.4% in April. It’s the best unemployment fee since October. (The authorities compiles the unemployment information utilizing a special survey than the one used to calculate job beneficial properties, and the 2 surveys generally battle.)
Here are some questions and solutions:
Q. IS THE LABOR MARKET AS STRONG AS THE GAIN OF 339,000 JOBS SUGGESTS?
A. Probably not. In May, employers added essentially the most jobs since January. So the general image is an encouraging one. Yet there are additionally indicators that hiring is cooling from the super-heated ranges of the previous two years.
For one factor, the size of the common work week declined, to 34.3 hours from 34.4 in April. That is a seemingly small drop, however economists stated it’s equal to chopping a number of hundred thousand jobs. It implies that, on common, weekly paychecks will likely be barely smaller. The common work week is down from 34.6 hours a 12 months in the past.
Hourly wage progress additionally dipped in May, proof that many companies really feel much less strain to dangle larger pay to seek out and maintain staff. Average hourly pay elevated 4.3% from a 12 months earlier, down from gangbusters beneficial properties of almost 6% a 12 months in the past.
And the rise within the unemployment fee partly mirrored larger layoffs. This prompt that not everybody who misplaced jobs in latest high-profile layoffs by banks, tech companies and media corporations have discovered new work.
Q. IS THE ECONOMY HEADED FOR A RECESSION?
A. The robust, regular job progress of the previous a number of months reveals that the financial system stays in stable form regardless of the Fed’s rate of interest hikes, which have made borrowing a lot costlier for companies and shoppers. A recession, if one happens, is probably going additional away than many economists had beforehand thought.
“As long as the economy continues to produce above 200,000 jobs per month, this economy simply is not going to slip into recession,” stated Joe Brusuelas, chief economist at consulting agency RSM.
More hiring interprets into extra Americans incomes paychecks, a pattern that means that shopper spending — the principal driver of U.S. financial progress — will continue to grow.
Q. SO DOES THAT MEAN THE ECONOMY IS IN THE CLEAR?
A. Not essentially. Some cracks within the financial system’s foundations have emerged. Home gross sales have tumbled. A measure of manufacturing facility exercise confirmed that manufacturing has contracted for seven straight months.
And shoppers are displaying indicators of straining to maintain up with larger costs. The proportion of Americans who’re struggling to remain present on their bank card and auto mortgage debt rose within the first three months of this 12 months, in line with the Federal Reserve Bank of New York.
Sales at a number of retail corporations, significantly low cost chains corresponding to Dollar General, have weakened. That is proof that lower-income shoppers are feeling significantly squeezed by excessive inflation.
And the specter of additional rate of interest hikes by the Federal Reserve, in its persevering with drive to combat inflation, at all times looms. The Fed’s hikes have elevated the prices of mortgages, auto loans, bank card use and enterprise borrowing.
The Fed has projected that its fee hikes will weaken the financial system and lift unemployment, although Chair Jerome Powell has held out hope that the central financial institution may curb inflation with out inflicting a deep recession.
“The continued strength in employment pushes back the start of a prospective recession but does not eliminate that likelihood,” stated Kathy Bostjancic, chief economist at Nationwide. “And if the economy remains too hot to meaningfully slow inflation, the Fed will simply raise rates higher, still a path towards a downturn.”
The U.S. financial system as a complete has been step by step weakening. It grew at a lackluster 1.3% annual fee from January by March, after 2.6% annual progress from October by December and three.2% from July by September.
Source: www.bostonherald.com”