May jobs preview: US job growth likely continued in May amid recession worries

The U.S. labor market likely remained hot in May, even as tighter monetary conditions and persistent inflation stoke worries of an economic slowdown.

The Labor Department is set to release its latest monthly jobs report at 8:30 a.m. ET on Friday. Here are Wall Street’s expectations for the report, according to Bloomberg data:

●Non-farm payrolls: +323,000 expected, +428,000 in April

●Unemployment rate: 3.5% expected, 3.6% in April

●Average hourly earnings, month-over-month: +0.4% expected, +0.3% in April

●Average hourly earnings, year-over-year: +5.2% expected, +5.5% in April

If the government’s data is in-line with forecasts, job growth in May will hit a 13-month low, but show growth that remains well above pre-pandemic trends.

Over the past year, the U.S. economy has added at least 400,000 jobs each month, bringing employment to just 1.2 million jobs short of levels before the pandemic hit the economy in March 2020.

With the labor market at a near-full recovery and inflation running hot, attention turns to the Federal Reserve’s efforts to normalize surging price levels.

“We’ve enjoyed 12 consecutive months of payroll growth north of 400,000 but that streak is close to an end,” Bankrate Chief Financial Analyst Greg McBride said in a note. “Job growth will continue but at a more modest pace in the months ahead as the Federal Reserve works to slow the economy and corral inflation.”

An unusually tight labor market has been the focal point of policymakers, with the imbalance between job openings and available workers placing upward pressure on wages and adding to inflationary pressures.

Wages are expected to climb again in May, rising 0.4% over last month and 5.2% over the prior year. In April, wages rose 0.3% over the prior month and 5.5% over the prior year.

Meanwhile, the unemployment rate is expected to fall to February 2020’s level of 3.5%, the lowest level for joblessness since 1969. The labor force participation rate is projected to show a slight increase to 62.3% from April’s 62.2%.

“The unemployment rate remains near 50-year lows and where it goes from here will depend in part on whether workers are coming off the sidelines,” McBride said. “With almost 2 open jobs for every unemployed worker, seeing the labor force participation rate get closer to pre-pandemic levels would be a welcome sight.”

ADP’s private sector payrolls report, which serves as a precursor to the Labor Department’s data, showed job creation in the U.S. private sector dropped off sharply last month to the slowest pace of growth in the COVID-era recovery, pointing to a cooldown in demand for labor. Meanwhile, weekly jobless claims declined last week after an unexpected uptick earlier in the month.

“Jobless claims were higher a couple weeks ago stoking some fears that the economy had suddenly hit a soft patch, but [Thursday’s] data indicate that a storm is not brewing in the labor markets,” FWDBONDS Chief Economist Christopher Rupkey said in a note. “Quite the opposite, with the drop in the total number of people receiving unemployment compensation indicating the unemployment rate could drop in tomorrow’s monthly report to a new record low.