The increase in the unemployment rate from a 53-year low of 3.4% in April reported by the Labor Department on Friday was mostly driven by Blacks. It was also partly the result of more people entering the labor force, an increase in supply that is reducing pressure on businesses to raise wages.
"However, the other areas of softness in this report suggests that the labor market is losing steam. There's likely enough pockets of softness in this report for the Fed to pass on raising rates at the next meeting." Despite massive layoffs in the technology sector after companies over-hired during the COVID-19 pandemic and the drag from higher borrowing costs on housing and manufacturing, the services sector, including leisure and hospitality, is still catching up after businesses struggled to find workers over the last two years. Industries like healthcare and education also experienced accelerated retirements.
But manufacturing payrolls fell and there were moderate job gains in mining, quarrying, oil and gas extraction as well as wholesale trade, retail trade and financial activities.Average hourly earnings gained 0.3% after rising 0.4% in April. That lowered the year-on-year increase in wages to 4.3% after advancing 4.4% in April. Annual wage growth averaged about 2.8% prior to the pandemic.