Editor’s note: This article has been updated to add more details and context.
The U.S. labor market strengthened in May as employers added 172,000 jobs, the Bureau of Labor Statistics reported Friday.
The monthly increase in total nonfarm payrolls far outpaced the 85,000 mark economists had penciled in, and came in only slightly below April’s upwardly revised 179,000.
The unemployment rate held steady at 4.3%, matching both the expected and previous 4.3%.
Average hourly earnings 0.3% on the month, matching expectations, and were up 3.4% from a year earlier.
The hotter-than-expected jobs data arrives after a series of hot inflation readings and less than two weeks before the Federal Reserve’s June 16-17 meeting, the first chaired by Kevin Warsh since he succeeded Jerome Powell in May.
March And April Jobs Hotter Than Initial Estimates
The May gain came with hefty upward revisions to prior months.
The BLS revised March payrolls up by 29,000 to 214,000 and April up by 64,000 to 179,000, leaving the two months a combined 93,000 higher than previously reported.
The back-to-back upgrades reinforce a labor market that has run firmer than the soft prints of early spring suggested.
With the revised figures, the three-month average comes to about 188,000 jobs, indicating a very strong labor market.
In May, hiring was concentrated in a handful of sectors.
Leisure and hospitality led with 70,000 jobs, far above its 14,000 average monthly gain over the prior year, with food services and drinking places alone adding 48,000.
Local government added 55,000, largely outside education. Health care contributed another 35,000, roughly in line with its recent trend.
Financial activities shed 22,000 jobs and has now lost 107,000 since peaking in May 2025, with the latest declines hitting insurance carriers and commercial banking.
Transportation and warehousing was essentially flat, dragged by a 9,000 drop in air transportation that the BLS tied to a business closure.
Construction, manufacturing, retail trade and professional and business services saw little change.
Markets Eye Fed Hawkish Path
Markets read the report as unambiguously hawkish.
The rate-sensitive 2-year Treasury yield jumped roughly 10 basis points to 4.14%, its sharpest move in weeks, as traders reinforced expectations of Fed rate hikes by year end.
According to the CME FedWatch Tool, the odds of at least one rate hike by the December 9 Fed decision have climbed to roughly 58%, eclipsing the combined probability of a hold or a cut.
The US dollar index – tracked by the Invesco DB US Dollar Index Bullish Fund (NYSE:UUP) – climbed to 99.25, while gold extended its slide, falling 0.42% to $4,421 as firmer yields and a stronger dollar stripped away the metal’s earlier gains.
Equity futures drifted lower as of 8:53 a.m. ET. S&P 500 futures fell 0.11% to 7,552.78 and Nasdaq 100 futures dropped 0.33% to 30,051.66, with rate-sensitive growth names under the most pressure.
Russell 2000 futures slid 0.23% to 2,912.0, while Dow futures clung to a 0.16% gain at 51,702.16. WTI crude eased 0.65% to $92.60 a barrel.
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