Employers added 272,000 jobs in May, according to the latest employment report released Friday.
This figure was higher than the 190,000 predicted by economists.
The unemployment rate, however, rose slightly to 4 percent, the first time it has exceeded that threshold since January 2022.
Stock futures initially plunged after the report, as Wall Street worried that a positive jobs report would deter the Federal Reserve from cutting interest rates. Higher rates are bad news for businesses: cutting consumer spending.
But the major indexes recovered and were in the green at 10:30 a.m., an hour after the market opened, in a boost for 401(Ks).
The S&P 500 fell after the latest jobs report, but then recovered and turned green
In the end, investors decided that the good news of a buoyant economy creating jobs outweighed fears of persistent inflation.
Investors had been waiting for payrolls data for more clues about the state of the U.S. economy and when the Federal Reserve might start cutting interest rates.
Any sign that the economy is too strong and that wages could rise – and fuel more inflation – makes Federal Reserve Chair Jerome Powell less likely to cut rates.
Ultimately, the data ended any chance of a rate cut at next week’s Federal Reserve meeting and in July.
But Wall Street believes there is still a 50 percent chance of a meeting in September.
Friday’s report will likely underscore Fed officials’ intention to delay any cuts to their benchmark interest rate while they monitor inflation and economic data.
Although Powell has said he expects inflation to continue to decline, he has stressed that Fed policymakers need “greater confidence” that inflation will fall back to its 2 percent target before reducing borrowing costs.
Annual inflation has slowed to 2.7 percent by the Federal Reserve’s preferred measure, from a high above 7 percent in 2022.
“This report is going to complicate the Fed’s job,” said Julia Pollak, chief economist at ZipRecruiter. “No one is getting those clear signals that they expected a rate cut to be appropriate in July or September.”
Last month’s hiring occurred across most of the economy. But job growth was particularly strong in health care, which added 84,000 jobs, and in restaurants, hotels and entertainment providers, which gained 42,000.