The U.S. economy added 172,000 jobs in May, a surprisingly strong gain for the economy, even as employers grapple with elevated prices.
The unemployment rate held at 4.3 percent, a low level, according to data released Friday by the Bureau of Labor Statistics.
The May report blew past estimates of around 80,000 job gains, as the economy shows signs of momentum after a patch of job losses in the fall and winter.
The economy also picked up more jobs than expected in March and April, as the Bureau of Labor Statistics revised those months up by 93,000 jobs combined, far more than originally reported.
It marks the first time the economy has added jobs for three consecutive months since last spring, even as American consumer feel increasingly down about the economy. Employers have added more than 100,000 jobs per month on average so far in 2026, a massive jump from last year’s bleak job creation, even though the economy needs few new jobs to keep up with population growth.
“Today’s numbers are consistent with other positive recent labor market indicators, as well, such as better-than-expected job openings and declining layoffs,” said Jerry Tempelman, vice president of economic and fixed income research at Mutual of America Capital Management. “Employers appear to be looking past economic and financial uncertainties brought about by the ongoing conflict in the Middle East.”
The strong jobs data gives the Federal Reserve more reason to keep interest rates steady as it grapples with rising inflation.
The Trump administration rushed to praised the strong job gains. “OUTSTANDING JOBS NUMBERS!” the White House posted on X Friday morning.
Major stock indexes tumbled on news of Friday’s strong job gains, and Treasury yields surged, as investors bet on increasing odds of an interest rate hike.
Leisure and hospitality led job gains, adding 70,000 positions in May, well above recent monthly average job growth, as businesses prepare for the summer vacation and the upcoming World Cup. A bout of good weather in May also could have helped boost hiring.
Local government payrolls jumped by 55,000 jobs, mostly outside of education. Health care added 35,000 positions, reflecting strong demand from aging baby boomers.
There was little or no job growth in transportation, warehousing, construction, manufacturing or retail. Air transportation shed 9,000 jobs, largely reflecting the closure of Spirit Airlines. Federal government payrolls began to stabilize after undergoing massive job cuts by the Trump administration.
The financial sector shed 22,000 positions and has lost more than 100,000 jobs over the past year. Other white-collar sectors showed little growth, as companies may be increasingly investing in artificial technology rather than hiring.
Joe Brusuelas, chief economist at RSM, attributed the surge in hiring at restaurants and bars to seasonal trends.
“It’s simply summer. Demand for airfares has not diminished at the major airlines despite the price shock, and seasonal increases in hiring are moving forward,” he said.
Average hourly wage growth over the past year slowed slightly in May, rising 3.4 percent over the past 12 months to $37.53 an hour. This marks the slowest pace since 2021. After years of real gains, wage growth is no longer keeping up with inflation, at 3.8 percent, adding new strain to Americans’ pocketbooks.
Some economists say that the labor market may not be heating up as May figures suggest, as separate labor market data shows that hiring and layoffs remain at a standstill. The pace of hiring remains near the lowest level since the height of the pandemic, according to other Labor Department data.
“The numbers may be even better than they look, given that many economists have determined the monthly breakeven rate — the number of jobs that need to be added to keep unemployment steady — has fallen to a much lower level,” Laura Ullrich, Indeed’s director of economic research, said in an analyst’s note. “The headline continues to obscure the same underlying story we’ve been telling for months: This is still a low-hire, low-fire market, and the calm on the surface reflects stillness underneath, rather than genuine momentum.”
Economists had been searching for signs the labor market might pick up again, after years of softening that has weighed on younger workers and those who have been unemployed for months.
Other recent data has shown mixed signals. Job openings surged to the highest level in April since 2024, according to a separate report released Tuesday.
“The increase in job openings is a welcome surprise,” said Ken Kim, senior economist at KPMG. “But if you look at the openings on a longer-term basis, like three, six-month, 12-month trends, it’s still pretty flat. … I would still characterize this labor market as steady.”
Meanwhile, the number of Americans filing for unemployment benefits, a proxy for rising joblessness, rose to the highest level in four months last week, according to another Labor Department report released Thursday.
The full effects of U.S. war with Iran are still trickling into the economy. But if inflation, especially gas prices, continue to rise, consumers could pull back on spending, pushing up the unemployment rate in future months, economists say.
For now, consumer spending remains hardy despite sour attitudes, as some Americans are flush with cash from robust tax returns.
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