A Strong Jobs Report Complicates the Fed’s Job
A Strong Jobs Report Complicates the Fed’s Job
May’s Jobs Report came in hotter than expected, with the economy adding 272K payrolls across a broad range of industries. In both the services sector and in manufacturing, significantly more industries added jobs than lost jobs. The average workweek for production and nonsupervisory employees edged up by 0.1 hour to 33.8 hours, as did manufacturing overtime hours.
A byproduct of stronger demand for workers, wage growth ticked upwards to 0.4% over the month, and 4.1% over the year. A strong job market with persistently high wage growth was not what investors had hoped for.
Nevertheless, there were some signs of slackening in the report. Although the employment-to-population ratio for prime-age workers (those aged 25 to 54) held steady, hitting a new all-time high for women, other household survey measures were weaker. The unemployment rate ticked upwards yet again to 4.0%, and the employment-to-population ratio for young workers—which had been steadily increasing earlier in the year—dropped. That decline could be a sign of a more challenging summer hiring season for teens and new grads.
The mixed report will complicate the Fed’s job. Fed members and investors had clearly been hoping for a softer report, which would have raised confidence in the appropriateness of a July or September rate cut. Instead, economic data has been mixed. Online job postings ticked upwards in May after being stable all 2024, according to ZipRecruiter data. The GDPNow estimate of Q2 GDP growth fell on Monday to 1.8% but has since jumped back up to 2.6% on hotter data, including the highest ISM Service Sector PMI in 9 months.
Paired with the strong jobs report, those signals may now carry more weight than the contraction in the ISM Manufacturing PMI, the decline in job openings, and the downward revision to Q1 GDP growth reported earlier in the weak.
Take a tour through the Jobs report in ZipRecruiter charts.
