US economy defied recession expectations, added 339,000 jobs in May

US jobs growth was almost twice as strong as forecast in May in an unexpected sign of labor market resilience ahead of central bank officials’ decision to keep interest rates steady or proceed with another hike.

The US economy added 339,000 new non-farm jobs last month, according to data published by the Bureau of Labor Statistics on Friday, compared with expectations of about 195,000. The figures for the previous two months were also revised upwards.

However, the unemployment rate rose slightly more than expected, from 3.4 percent to 3.7 percent, while month-over-month wage growth slowed to 0.3 percent. Wage growth eased but remained high at 4.3 percent year-on-year, highlighting the tightness in the labor market.

Employment and wage growth are key drivers of inflation, particularly in the services sector, and economists and officials are viewing signs of a slowdown in these measures as an indicator that price pressures are also slowing.

Economists traditionally expect wage growth to fall to around 3.5 percent to hit the Fed’s 2 percent inflation target.

The unexpectedly strong data could challenge expectations that the central bank will halt the interest rate hike cycle at its next meeting in mid-June after raising rates 10 times in a row.

Several senior central bank officials suggested this week that they could hold off on tightening for a month to give themselves more time to assess the impact of their actions so far.

Philip Jefferson, President Joe Biden’s pick to become the next Fed vice-chair, said Wednesday that “leaving a rate hike to the coming meeting will allow the committee to see more data before making a decision about the extent of additional policymaking.” Will be allowed”, but added a pause would not prevent the central bank from resuming growth in July.

Philadelphia Fed President Patrick Harker also suggested putting off the rate hike for another meeting.

Friday’s data, however, is the latest in a series of data that reinforced the challenges of getting inflation back to its target level, following higher job openings and stubbornly high core inflation data. Cleveland Fed President Loretta Meister told the Financial Times earlier this week that there was “no compelling reason” to hold.

Futures markets on Thursday afternoon were pricing in a 25 percent chance that rates rise this month, compared to a peak of 70 percent earlier in the week. However, investors still see a good chance of another rate hike at the Fed’s upcoming meeting in July.