Jobs Increase 172,000 in May; Industry Economists Share Takes

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The Bureau of Labor Statistics released jobs data for May, showing that total nonfarm payroll employment increased by 172,000. The unemployment rate was flat at 4.3%.

Job gains occurred in leisure and hospitality, local government and healthcare. Employment in financial activities fell. MBA SVP and Chief Economist Mike Fratantoni noted that the finance sector has shed 107,000 jobs since last May.

The change in total nonfarm payroll employment for March was revised up by 29,000–from 185,000 to 214,000. The change for April was revised up by 64,000, from 115,000 to 179,000. As a result, employment in March and April combined is 93,000 higher than previously reported.

“Wage growth slowed to a 3.4% pace in May. That slowdown is impacted by the shift in job growth from higher-paid to lower-paid sectors over the past year. It is notable that wage growth is running below the pace of inflation, putting a strain on household budgets,” Fratantoni said. “While the job market is not showing broad-based strength, overall, there is surprising resilience. Meanwhile, inflation is too high. MBA continues to anticipate that the Fed’s next move will be a rate hike, and that means mortgage rates are unlikely to drop anytime soon.”

“That broadening complicates the Federal Reserve’s policy path heading into the June FOMC meeting. As the final jobs report before the meeting, the May data could carry extra weight in shaping the Fed’s tone. Stronger payroll growth, positive revisions, steady wages and broader hiring give policymakers less reason to signal labor-market support, especially with renewed inflation pressure from higher oil and energy prices still in view. The result could be a shift away from a dovish bias and toward a more neutral stance,” said First American Chief Economist Sam Williamson.

“For housing, that cuts both ways. Stronger and broader hiring supports buyer confidence, income growth, mobility and household formation–all important for a housing market where demand has been delayed, not erased. But the same strength can make near-term mortgage-rate relief harder to come by if longer-term Treasury yields stay elevated. The upside is that even a modest move lower in mortgage rates, paired with greater confidence in job security, could give some buyers the push they need to re-enter the market in the second half of the year,” Williamson continued.