US Labour market sends mixed signals, giving Fed reason to pause

The US labour market sent conflicting signals in May as payrolls surged along with joblessness, giving Federal Reserve officials more reason to pause interest-rate hikes.

Nonfarm payrolls increased 339,000 last month after an upwardly revised 294,000 advance in April, a Bureau of Labor Statistics report showed Friday. The unemployment rate rose to 3.7%, while wage growth slowed.

The advance was broad-based, reflecting gains professional and business services, government and health care.


Markets reacted to the advance in payrolls, with Treasury yields jumping after the report. Traders upped their bets of the Fed hiking rates by the end of July.

For the Fed, however, policymakers will also be looking at the surge in the unemployment rate, which was the biggest one-month increase since April 2020. There were 440,000 more people out of a job in May, also the largest monthly rise since the onset of the pandemic.

Even though labor demand has remained resilient, it's unclear how long that will last. With a credit crunch threatening to halt the expansion and more companies planning to let workers go, hiring and pay gains may slow substantially in the coming months.