The Line: May Job Growth Much Higher than Expected

This week, we have the latest on the labor market, which has taken off like a rocket in the past three months.

May Job Growth Much Higher than Expected

Payrolls rose by 172,000 last month, easily beating the consensus estimate of 80,000. Here are the other headlines from the Labor Department’s report:

• The unemployment rate was unchanged at the very low rate of 4.3%.
• Leisure and hospitality added the most jobs in May (+70,000), followed by local governments (+55,000).
• Job growth revised up by 64,000 for April and 29,000 for March. These sharp upward revisions seem to prove that the recent surge in hiring is real and not some statistical error.
• Wages grew by 0.3% in May and are 3.4% higher than a year ago. Both those figures were in line with estimates.

So, this is basically another great jobs report. How great you ask? The US has already added 569,000 jobs in the first five months of 2026, compared to just 133,000 in all of 2025.

That said there are two things in the May report that concern me:

1. The labor force participation rate is not going up.
2. Local government accounted for 55,000 of the jobs created in May.

The labor force participation rate is the percent of the working-age population either employed or actively looking for a job. With such strong job growth so far this year, it will be hard for companies to find workers especially with stricter immigration rules. We found out this week that the number of job openings rose to 7.6 million in April, their highest level in almost two years.

The jump in hiring by local governments is concerning for two reasons:

• It’s unlikely to continue.
• We’d rather see the private sector doing the hiring.

All this happy hiring news may be hard to believe, especially since we’re also seeing a surge in long-term unemployment. Is it just that these people don’t match the skills companies are looking for, or is it something else? Wish I had a clear answer on this one, so we’ll just have to keep watching the data closely.

If you’re wondering why companies are hiring so aggressively now after barely any job growth in 2025, I can shed some light on that. In the first quarter of 2026, 85% of S&P 500 companies beat their earnings per share estimates, and the S&P 500 index is up 11% so far this year. Basically, companies are making more money and thus feel more confident about bringing on new workers.

I don’t expect this report to have much of an impact on the Fed, as they seem committed to keeping rates steady for the next few months.

Have a great weekend, and Let’s Go Knicks!

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