May job growth boosted by strong hiring in the government, health care

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The U.S. economy added jobs at a faster-than-expected clip in May as strong hiring in health care and the government helped to boost the overall payroll figure.

Employers added 272,000 jobs in May, the Labor Department said in its monthly payroll report released Friday, easily topping the 185,000 gain forecast by LSEG economists. But the unemployment rate unexpectedly inched higher to 4% against expectations that it would hold steady at 3.9%. It marked the highest level for the jobless rate since January 2022.

“The May jobs report sent conflicting messages,” said Bill Adams, chief economist for Comerica Bank. “Payrolls rose solidly, and wage growth picked up, signs the labor market is still running hot. On the other hand, the unemployment rate rose, recent job growth has been concentrated in part-time jobs, and temp jobs fell, signs the labor market is cooling.”

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The health care sector accounted for the biggest payroll gains in May, adding 68,000 jobs last month. Employment continued to trend upward in doctors’ offices (13,400), home health care services (19,600), hospitals (15,000) and nursing and residential care facilities (10,600).

There were also sizable gains within the government last month, with payrolls growing by 43,000. The bulk of those jobs took place within local governments, excluding education (23,700). Local government education, meanwhile, added 9,800 jobs to the headline figure. 

US JOB GROWTH JUMPS BY 272K IN MAY WHILE UNEMPLOYMENT UNEXPECTEDLY RISES

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Hiring in the leisure and hospitality sector was the third-biggest contributor to the headline job gain last month. The industry onboarded 42,000 employees in May. Most of the gains took place within bars and restaurants, which added 24,600 workers. Amusement, gambling and recreation industries, meanwhile, added 10,200 workers.

There were also notable gains within other industries, including professional and business services (33,000), construction (21,000), social assistance (15,200) and transportation and warehousing (10,600).

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Just one sector of the economy saw hiring decline last month: mining and logging, which shed 4,000 jobs. The losses stemmed from mining, quarrying and oil and gas extraction, as well as support activities for mining.

The labor market has remained historically tight over the past year, defying economists’ expectations for a slowdown. Economists say it is beginning to cool after last year’s blistering pace, but it is still nowhere near breaking.

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“Payroll gains were not only large, but also widespread,” said Nick Bunker, economic research director for North America for Indeed Hiring Lab. “But while there is still a lot of strength in the labor market, its ability to continue to deliver robust gains at these levels will likely be challenged going forward as job openings continue to fall, and the economy continues to cool.”

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