US posts another month of strong job gains in May; unemployment rate steady at 4.3%

[WASHINGTON] The US economy posted another month of strong employment gains in May, confirming that the labour market was gaining traction after stumbling last year, and potentially giving the Federal Reserve more room to keep interest rates unchanged amid rising inflation stemming from the war with Iran.

Non-farm payrolls increased by 172,000 jobs last month after rising by an upwardly revised 179,000 in April, the Labor Department’s Bureau of Labor Statistics said in its closely watched employment report on Friday (Jun 5).

Economists polled by Reuters had forecast payrolls increasing by 85,000 jobs after a previously reported 115,000 rise in April. Estimates for job growth ranged from 50,000 to 125,000.

The increase added to gains notched in the prior two months. Economists estimated the economy needs to create between zero and 50,000 jobs per month to keep up with growth in the working-age population.

The so-called break even rate has dropped because of an immigration crackdown that has reduced the labour force, limiting the rise in the unemployment rate.

The jobless rate remained at 4.3 per cent for a third straight month. The improvement in payrolls mostly reflects low layoffs. Businesses have been cautious about boosting hiring as they deal with uncertainty, first from President Donald Trump’s sweeping tariffs last year and now the US-Israeli war with Iran.

There are so far no indications that the Middle East conflict, which has unleashed a surge in oil prices and other products shipped through the Strait of Hormuz, is having a material impact on the jobs market.

Fiscal stimulus, in the form of tax and tariff refunds, has bolstered corporate profits and allowed businesses to refrain from large-scale firings, economists said.

The US Supreme Court in February struck down the tariffs, and some businesses have filed for refunds. Corporate profits increased by US$40.4 billion in the first quarter and have been rising since the second quarter of 2025.

SEE ALSO

US jobless claims rise in holiday week to most since February

US Fed’s Kevin Warsh inherits economy increasingly squeezed by inflation

US manufacturing activity expands by most in 4 years

US merchandise-trade deficit narrows on rise in exports

More

Despite the strength in payrolls, the labour market remains in what economists have termed a “slow-hire, slow-fire” equilibrium. Financial markets expect the US central bank to leave its benchmark overnight interest rate in the 3.5 to 3.75 per cent range into 2027. REUTERS