The increase in the unemployment rate from a 53-year low of 3.4% in April, which was reported by the Labor Department on Friday, was the largest since April 2020. Outside the COVID-19 pandemic, it was the biggest jump since 2010, reflecting a drop in household employment and a rise in the workforce. The gradual increase in the labor pool is easing 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." The backfilling of these retirements and increased demand for services are some of the factors driving job growth. Pent-up demand for workers was underscored by Labor Department data this week showing 10.1 millionLast month, professional and business services added 64,000 jobs. Government employment increased by 56,000, but remains 209,000 jobs below its pre-pandemic level.
Financial markets see a 70% chance of the Fed keeping its policy rate unchanged at its June 13-14 meeting, according to CME Group's FedWatch Tool. Much would depend on May's consumer prices report due in the middle of this month. The Labor Department's Bureau of Labor Statistics, which compiles the employment report, did not record the work stoppage in its May strike report.
"The employer survey is usually a more accurate reflection of the job market given its much larger sample size," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. "The household survey may also be better at capturing turning points in the economy."