WASHINGTON—The U.S. economy added 139,000 nonfarm jobs in May, surpassing economists’ expectations of 126,000. The unemployment rate remained unchanged at 4.2%.
“Job growth slowed to 139,000 in May, below the 149,000 average for the past year, and was revised lower by a cumulative 95,000 for March and April,” said Mike Fratantoni, SVP and chief economist at the Mortgage Bankers Association. “The unemployment rate remained steady at 4.2%, but the participation rate dropped, indicating that fewer individuals without a job are actively looking for work. All in, the job market is softening, but not quickly.”
Fratantoni pointed out job gains remain concentrated in just a few sectors, particularly health care, education, and leisure and hospitality.
“Federal government employment has declined again and is now down by almost 60,000 compared to the start of the year,” he said. “Wage growth remains relatively steady at 3.9% over the past year. At some point, we would expect wage growth to decelerate further if the unemployment rate begins to rise, moving bargaining power from employees to employers.
“These data lined up well with market expectations and are likely to keep the Federal Reserve on hold for the next meeting or two,” continued Fratantoni. “If the job market does weaken further this summer, as MBA forecasts, there will likely be two cuts to the federal funds target this year.”
Steady Market
The May jobs report indicates a steady labor market, noted America's Credit Unions Senior Economist Dawit Kebede.
"The economy added 139,000 jobs – slower than previous month but above expectations. Job gains in May also exceed the monthly average of 124,000 since January," he said. "A labor market near maximum employment rate implies the Federal Reserve is less likely to cut rates soon, especially while inflation remains above target and faces upward pressure due to tariffs. Markets now assign a lower probability to a rate cut before September. For credit unions, a low unemployment rate implies members are more likely to afford new loans and stay current on the existing one, supporting overall asset quality.”