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CU Economists Still See Pause in Rate Increases Following Latest Jobs Reporting

WASHINGTON–The economy saw the second consecutive month of accelerated hiring in May  with the country adding a seasonally adjusted 339,000 new jobs.

In addition, the Bureau of Labor Statistics also revised upward the numbers for jobs added in March and April.

Kebede, Darwit

Dawit Kebede, CUNA

But employment is sending mixed signals, as the unemployment rate rose to 3.7%, still near historic lows but an uptick from April’s 3.4%.

According to the new jobs report, the hiring and low unemployment rate have put upward pressure on wages. Average hourly earnings grew a 4.3% in May over the prior year, similar to annual gains in March and Aprils, according to the government data.

The big question for many: what do the employment numbers mean for the Fed and whether it will again raise interest rates?

CUNA: Pause in Rates Likely   

“The economy added 339,000 jobs in May, which was much higher than the consensus expectation, signaling a stronger labor market. The report also revised up job gains in the prior two months by 93,000, bringing the three-month average job growth to 283,000,” said CUNA Senior Economist Dawit Kebede. “The average hourly earnings grew at an annualized rate of 3.7%, indicating moderating wage growth. The average workweek also declined slightly in May. This shows that the labor market is less tight compared to previous months, despite strong hiring.

Long, Curt

Curt Long, NAFCU

“The employment situation report is based on two different surveys conducted by the Bureau of Labor and Statistics,” Kebede continued. “The household survey is used to calculate the unemployment rate, while the establishment survey portrays the number of jobs employers added. The unemployment rate increased from 3.4% to 3.7% in May as households reported an increase in the number of people unemployed.

“The report supports the Federal Reserve's inclination to pause rate hikes in June. Although strong headline job numbers indicate continued hiring demand by employers, the increase in the unemployment rate, moderating wage growth, and decline in the average workweek all indicate moderating labor market conditions,” Kebede stated.

NAFCU: ‘Difficult to Parse’

“The May jobs report was a difficult one to parse, with a wide disparity in the two source surveys. The household survey was weak, showing increased unemployment, but the establishment survey beat expectations with 339,000 new jobs,” said NAFCU Vice President of Research and Chief Economist Curt Long. “The Fed had a high bar for a June hike and will likely not raise rates, but it’s difficult to rule out a July hike if forthcoming inflation data is strong.” – 

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