U.S. Employers Add 172,000 Jobs in May as Unemployment Holds at 4.3%

U.S. employers added 172,000 jobs in May, the third straight monthly gain, and the unemployment rate held at 4.3 percent, according to the Labor Department report released Friday and described by NPR and PBS NewsHour. Job gains for March and April were also revised higher, by a combined 93,000, PBS reported.

Restaurants and bars added 48,000 jobs in anticipation of strong summer demand, and the overall hospitality industry added 70,000, NPR reported. Construction companies and local governments were also hiring, and health care added 35,000. PBS said local government hiring rose by more than 50,000, the largest upside surprise, and that leisure and hospitality had its biggest May hiring since January 2023. Banks and insurance companies went the other way, cutting 22,000 jobs, NPR said. Over the past three months, employers have added an average of 188,000 jobs a month.

Economist Diane Swonk of KPMG told PBS she had expected about 110,000 jobs and had described the labor market as frozen. Kevin Hassett, director of the National Economic Council, called the hiring momentum “enormous,” PBS reported.

Paychecks are not keeping up. Average wages in May were up just 3.4 percent from a year earlier, NPR said, likely not enough to keep pace with inflation: prices for the 12 months ending in April were up 3.8 percent. Swonk told PBS that wages for the top third of earners are rising faster than inflation while those of the bottom two-thirds are falling behind it, and she expects inflation above 4.2 percent when the May consumer price report comes out next week. Prices have been rising rapidly since the war with Iran began just over three months ago, NPR noted.

Underneath the headline, Swonk pointed to elevated underemployment, discouraged workers and rising long-term unemployment. She said the rate at which people quit jobs fell in late April to its lowest since August 2020, and that unemployment for new college graduates is near levels last seen in the early 2010s. PBS also noted that federal employment is at its lowest level since 1966, with about 350,000 federal workers lost since October 2024.

The data matter most for the Federal Reserve. Kevin Warsh, the president’s pick, is in his first weeks as chair, and the central bank meets in mid-June. NPR said the stronger job market means the Fed is likely to focus on inflation and is unlikely to cut interest rates soon, despite pressure from Trump to lower them. Swonk went further, arguing the Fed will need to raise rates, a view she said had become the consensus within the Fed’s leadership before Warsh joined.

Markets read the numbers as a warning about rates. PBS reported that stocks fell sharply Friday despite the strong jobs figures, with the Dow dropping nearly 700 points, the Nasdaq about 4 percent and the S&P 500 posting its first losing week in 10 weeks amid concern about a possible rate increase.