The U.S. economy posted a third straight month of strong job gains in May, confirming the labour market was gaining traction after stumbling last year and giving the Federal Reserve more room to keep interest rates unchanged amid rising inflation due to the war in the Middle East.
The US labour market stayed resilient as the nonfarm payrolls increased by +172K in May-26 (Apr-26: 179K), well above consensus of +85K jobs and marking three consecutive months of monthly employment growth by more than +100K. Employment rose for leisure and hospitality (+70K), local government (+55K), health care (+35K) , and manufacturing (+7K). However, employment in financial activities declined by –22K.
Meanwhile, unemployment rate held at 4.3% in May-26, unchanged since Mar-26 and in line with expectations. Likewise, the labour force participation rate remained at 61.8% and employment rate edged up to 59.2% (Apr-26: 59.1%). However, wage growth slightly moderated as average hourly earnings rose softer by +3.4%yoy (Apr-26: +3.6%yoy).
Steady job gains during the month suggest that the labour market is regaining its footing. MBSB said this strength gives the Fed the leverage it needs to hold interest rates steady, especially as conflict in the Middle East threatens to push inflation higher. Nonetheless, while financial markets boosted the chances of an interest rate hike in Dec-26. On the downside, the long-term labour market outlook remains clouded by prolonged geopolitical tensions and cautious hiring influenced by uncertainty surrounding the Trump administration’s trade policies.
