The US added 172,000 nonfarm jobs in May, partly driven by local government and hospitality hiring, while job growth for the prior two months was revised sharply higher, suggesting surprising strength for the labor market as Gulf war impacts begin to push up inflation.
Job gains in April were revised up by 64,000 to 179,000 and March employment was revised higher by 29,000 to 214,000, for combined gains of 93,000 more than previously reported, according to the Bureau of Labor Statistics (BLS).
Economists surveyed by Trading Economics had expected median gains of 85,000 in May.
"Payrolls have surprised the consensus to the upside for three straight months, a relatively rare occurrence," Pantheon Macroeconomics said in a note. "That pace is unlikely to be sustained."
The jobless rate held steady at 4.3pc.
Following the release of the report, Fed funds futures were tracking about 66pc odds the Federal Reserve will hike its target rate by at least a quarter point by the end of the year, up from about 50pc on Thursday.
The Federal Reserve said in its latest Beige Book report on economic conditions that in May most regions reported "... a low-hire, low-fire environment, with workers increasingly reluctant to change jobs because of economic uncertainty. Hiring remained selective and primarily focused on critical roles or attrition replacement."
Average hourly earnings rose by an annual 3.4pc in May, down from 3.6pc in April.
Employment in mining, oil and gas extraction rose by 5,000 in May and is up by 10,000 since February.
Manufacturing added 7,000 jobs but is down by 46,000 from a year earlier, while construction added 17,000. The information technology sector shed 2,000 jobs.
Employment in local government rose by 55,000. Federal government added 1,000 jobs.
Health care added 35,000, about in line with the monthly gain over the prior 12 months. Social assistance gained 12,000, also near trend.
Leisure and hospitality added 70,000 jobs, about four times the trend, with restaurants and drinking places adding 48,000.
Transportation and warehousing were up by 1,000 and are off by 92,000 since reaching a peak in February 2025. Air transport lost 9,000, largely reflecting the shutdown of Spirit Airlines.
Financial activities declined by 22,000 and is down by 107,000 from a recent peak of May 2025.
