US economy added a whopping 272,000 jobs in May

By Alicia Wallace | CNN

US job growth shot much higher than expected in May, jumping to 272,000, while the nation’s jobless rate rose slightly and broke a 27-month streak of below-4% unemployment.

At a time when Americans and the Federal Reserve are clamoring for clear-cut data about the state and trajectory of the economy, Friday’s jobs report was much more opaque than everyone had hoped.

“It’s hard not to like a lot of jobs, and this report was well above what I expected, and I think just about what everyone expected,” Dean Baker, an economist who co-founded the Center for Economic and Policy Research, told CNN. “We’re seeing a lot of job growth, that’s a generally good story.”

He added: “But the Fed’s going ‘Oh, can we cut [interest rates]? Can we cut? Can we cut?’ It’s hard to look at this report and make a good case for cutting, I’ve got to say.”

May’s job gains are considerably higher than the April total, which was revised down to 165,000, according to Bureau of Labor Statistics data released Friday. The May data came in well above expectations for 180,000, according to FactSet consensus estimates.

The unemployment rate rose to 4% from 3.9%. It’s the first time in more than two years that the jobless rate is not below 4%.

Stronger-than-expected wage gains for the month pushed up average hourly earnings to 4.1% over the past year, reversing a monthslong trend of cooling there.

“The Fed doesn’t directly target wages; but where the wages picked up are in the areas where we’ve seen the most inflation,” Diane Swonk, chief economist with KPMG, told CNN.

That’s in the service sector, everything from personal care services, dry cleaning, cleaning and home maintenance and vehicle maintenance, she said.

“And that is something that is hard for the Fed, because in order for some of the increases we’re seeing in the service sector, we need to see offset in goods prices in order to bring inflation down,” she said. “But you need a lot of that consistently to deal with stickier inflation that we’re seeing in the service sector; and, unfortunately, wages matter more in particular areas where inflation has gotten stickiest.”

Critical inflation data is due out Wednesday: The May Consumer Price Index lands the same day the Fed will make its latest policymaking announcement (which is overwhelmingly expected to be that they are keeping rates on hold).

Traders weren’t too giddy about Friday’s employment report, at least when it comes to rate cut prospects. Wall Street’s best bet for the first rate cut is now December, the CME FedWatch Tool shows.

A tale of two surveys