The U.S. adds 172,000 jobs. Many are in restaurants, bars and hotels

The U.S. labor market demonstrated renewed vigor in May, with employers adding a robust 172,000 jobs. This figure, released by the Labor Department, marks the third consecutive month of solid employment gains, suggesting the market is finding its footing after a period of more modest growth. Significantly, job gains for March and April were also revised upward, painting an even stronger picture of recent economic activity. A substantial portion of the new positions was concentrated in the leisure and hospitality sectors, which collectively added 70,000 jobs in anticipation of heightened summer activity; restaurants and bars alone contributed 48,000 roles.

Beyond hospitality, other key sectors experienced growth. Healthcare, a consistent driver of employment, added another 35,000 jobs, while local government and construction companies also saw increased hiring. Conversely, the financial sector, encompassing banks and insurance companies, faced job reductions, shedding 22,000 positions overall in May. The report indicates a definite acceleration in hiring this spring, a stark contrast to the more anemic job growth observed last year. Over the last three months, the economy has averaged 188,000 new jobs per month. Meanwhile, the overall workforce expanded modestly by 83,000 individuals, and the unemployment rate held steady at 4.3%, signaling a relatively tight labor market.

Despite the uptick in hiring, wage growth remains subdued. Average wages in May were up just 3.4% from a year ago. This increase is likely insufficient to keep pace with inflation, which has seen consumer prices rise by 3.8% over the 12 months ending in April. Rapid price increases have been a notable concern, particularly since the U.S. initiated its conflict with Iran approximately three months ago. With signs of a stabilizing job market, the Federal Reserve, under the leadership of new chair Kevin Warsh, is expected to pivot its primary focus towards reining in inflation. This strategic shift suggests that interest rate cuts are improbable in the immediate future, despite existing pressure from President Trump. Policymakers at the Fed will closely examine the forthcoming May inflation report next week as they prepare for their next policy meeting in mid-June.