US Labor Market Gains Stabilize Growth, Signal Fed Rate Hikes

The U.S. labor market showed solid strength in May, with non‑farm payrolls increasing by 172,000 jobs, far above forecasts and extending a three‑month streak of hires exceeding 100,000. The unemployment rate held at 4.3%, while revisions added 93,000 jobs for March and April, pushing the three‑month average to 188,000. Healthcare, leisure, hospitality and local government led sectoral gains. However, annual wage growth slowed to 3.4% and real earnings are projected to lag inflation, raising concerns about purchasing‑power erosion. The number of long‑term unemployed rose to nearly two million, highlighting structural mismatches. Analysts see the data as a tentative stabilization that gives the Federal Reserve more time but does not eliminate inflationary pressures. Ed Yardeni expects the Fed to shift to a tightening bias at its June meeting and to raise the federal funds rate in July if current trends continue, noting that unit‑labor‑cost inflation has eased to 0.5% YoY. Persistent oil‑price uncertainty and a still‑elevated consumer‑price index keep policymakers cautious, with the upcoming CPI report set to influence the Fed’s next steps.