Market Analysis

US Job Growth Expected to Maintain Moderate Pace in May

Amos Simanungkalit · 07 Jun 20243.6K Views

U.S. job growth is expected to have continued at a steady pace in May, with wages likely maintaining their current levels. This outlook suggests that while the Federal Reserve will likely hold off on raising interest rates, there could be increasing expectations for rate cuts later this year.

The upcoming employment report from the Labor Department, due on Friday, is anticipated to show the unemployment rate remaining below 4% for a record 28th consecutive month. Despite recent softening in the labor market, its resilience has allowed the Fed to proceed cautiously in adjusting interest rates.

Analysts predict nonfarm payrolls increased by 185,000 jobs in May, slightly above April's rise of 175,000 jobs but below the average of the previous three months. Financial markets are reacting to signs of potential job growth below expectations, with the 10-year U.S. Treasury yield near its lowest point in two months this week.

There are indications of a slowdown in hiring among small businesses, suggesting broader economic conditions may be cooling slightly. The Fed continues to monitor these trends closely, aiming to strike a balance between sustaining economic growth and managing inflation.

Average hourly earnings are forecasted to have risen by 0.3% in May, following a 0.2% increase in April, while year-over-year wage growth is expected to match April's 3.9%, which was the lowest in three years. Wage increases within the 3%-3.5% range are viewed as consistent with the Fed's inflation targets.

Looking ahead, economists anticipate ongoing softening in the job market as labor supply and demand normalize. Recent data also indicates a decline in job openings and a decrease in available jobs per job-seeker.

Despite economic growth slowing in the first quarter, economists expect the job market to remain resilient, buoyed by increased immigration over the past year. However, uncertainties remain regarding potential impacts on job gains from reduced hiring by small businesses and shifts in consumer demand and profitability.

"The job market has shown unexpected resilience, supporting household finances amid concerns over prices and interest rates," noted Mark Hamrick, senior economic analyst at Bankrate.

Overall, while the labor market shows signs of moderation, its current performance suggests ongoing stability in employment and wage growth, influencing the Fed's decisions on future rate adjustments.