U.S.employers added more than 390,000 jobs in May, despite Americans struggling with high inflation and increased interest rates.
The healthy figure continues a solid hiring trend that has boosted the U.S. economy, plagued by troubling high inflation and interest rates.
Nonetheless, many companies are desperate to employ workers as customers continue to spend freely, despite growing fears about rising prices.
Rising salaries and large savings accounts built up during the pandemic have helped Americans’ finances, particularly in higher-income households, WFAA reports.
Inflationary pressures further exacerbate the job market’s growth itself. Companies are passing on some of their increased costs to customers through higher prices.
Food, gas, rent, and other expenditures – which disproportionately affect lower-income households – are rising at the quickest rate in more than 40 years.
Despite predictions that the economy may shrink in the coming months as the Federal Reserve Bank steadily increases interest rates to combat inflation, last month’s growth demonstrates a still-healthy labor market. The unemployment rate remained constant at 3.6%, according to the U.S. Labor Department.
Last year, rising demand for vehicles, furniture, computer equipment, and other big-ticket items combined with overburdened supply chains and parts shortages drove inflation. Prices for airline tickets, hotel rooms, and restaurant meals have risen recently as Americans have shifted more of their spending to these sectors.
However, the central bank’s gradual rate hikes, which are on pace for their quickest growth in more than 30 years, could weaken the economy in the long run.
The Fed increased its short-term rate by a half-point last month, the most significant increase since 2000, to a range of 0.75% to 1%, to curb spending and control inflation.
“The impact of a single quarter-point interest rate hike is inconsequential on the household budget,” said Greg McBride, the chief financial analyst for Bankrate.com. “But there is a cumulative effect that can be quite significant, both on the household budget as well as the broader economy.”