US nonfarm payrolls increased by 559K in May. While this was below consensus expectations of a 650K gain, it represented a strong increase after a disappointing rise of 278K in April. Overall job gains were driven by increases of 292K in leisure and hospitality, 87K in education and health services and 67K in government. The unemployment rate is now at 5.8%, the lowest since March 2020, but still well above the pre-pandemic rate of 3.5%, and the employment-to-population ratio is around 3 percentage points lower. All in all, the May numbers represent a welcome improvement, although they are unlikely to lead to an imminent shift in Fed policy. Nevertheless, with the recovery likely to remain robust over coming quarters, further labour market improvements alongside elevated inflation are likely to fuel increased calls by Fed officials for the beginning of discussions on the potential for a future tapering of asset purchases.
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