Jobs, Inflation, Fed
Economists Forecast Steady May US Job Growth Despite Rising Inflation Ahead of Fed's Rate Decision
Ahead of the May jobs report, economists expect hiring to remain steady even as inflation and energy prices rise amid the ongoing war in Iran, with unemployment seen holding at 4.3% and payroll gains around 80,000 to 85,000. Forecasts also call for average hourly earnings to increase about 0.3% after falling behind inflation in April, while wages are expected to be about 3.4% higher than a year ago. Recent inflation has accelerated to 3.8%, largely driven by surging oil and gas prices, and the jobs data are coming just days before the next inflation release and ahead of Fed Chair Kevin Warsh’s first interest-rate decision. Analysts at Citigroup project a third straight month of job growth but warn monthly results may be more volatile this year due to shifting labor-force patterns tied to slowing immigration. Bank of America expects job gains to continue led by education and health, with possible broadening into trade and transportation, leisure and hospitality, and construction. Other economists caution that specific shocks, including the Spirit Airlines bankruptcy, could weigh on the payroll figure.
Key Points
The U.S. Bureau of Labor Statistics is set to release the May jobs report at 8:30 a.m. ET, and the projection is for about 85,000 jobs (with unemployment at 4.3%). If it meets or exceeds expectations, it would follow a run of March (+185,000) and April (+115,000) job gains, and it would arrive “just under two weeks before” Fed Chair Kevin Warsh’s first interest-rate decision.
Citigroup economist Veronica Clark warned that the key driver of potential month-to-month swings isn’t only the economy—it’s labor-force churn: “Recent large and rapid changes in the size and composition of the labor force due to slowing immigration could mean employment patterns shift throughout the year in unpredictable ways, increasing the monthly volatility of data.”
Bank of America linked expected job leadership in education and health not just to demographics, but also to technology adoption speed—saying AI adoption has been “slower” in those sectors, helping keep hiring resilient.
Bank of America also offered more specific sector tailwinds: “Warm weather could boost the leisure and hospitality industry,” and “construction could benefit from demand for AI data centers.”
Capital Economics cautioned that a discrete shock could distort payrolls: it pointed to the Spirit Airlines bankruptcy on May 2, saying it could “dent the payrolls figure.”
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