The US economy created 559,000 jobs last month as the unemployment rate fell to 5.8 per cent, suggesting the labour market has gained some strength amid fears that worker shortages were holding the recovery back.
The non-farm payrolls data released by the US labour department on Friday was slightly worse than economists’ expectations of about 650,000 employment gains, but marked an improvement over the 278,000 jobs posted in April.
The figures were released at a pivotal moment for the US economy, with growth rebounding strongly thanks to the lifting of pandemic restrictions across the country and hefty fiscal stimulus, while triggering a burst of inflation.
Meanwhile, businesses have been complaining that they are struggling to rehire workers to cope with surging demand, prompting them to raise wages in a bid to attract new employees.
The April jobs report had fallen dramatically short of economists’ expectations and well below the pace of employment creation in March, raising fears that widespread labour shortages could permanently afflict the US economic recovery.
That weakness raised the stakes for the May report, which was being closely watched for evidence that the sluggishness of hiring in April was a warning sign of a broader problem – or a temporary phenomenon tied to the lingering impact of the virus, school closures and government transfers, that would ultimately be resolved.
The May jobs report comes as policymakers at the Federal Reserve are preparing to open a discussion on easing some of the massive monetary stimulus pumped into the US economy since the start of the pandemic.
The central bank has been buying $120bn of assets every month since last year, and monetary policymakers have signalled intent to begin talking about “tapering” that pace of bond purchases — though they have not said when they expect to start that process.
An improvement in job creation in May would also be of comfort to the Biden administration, which was taken by surprise and put on the defensive by the April slowdown, as Republicans questioned the effectiveness of its economic policies.
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