May Jobs Report Commentary from MBA's Mike Fratantoni

The following is MBA SVP and Chief Economist Mike Fratantoni’s reaction to this morning’s U.S. Bureau of Labor Statistics report on employment conditions in May.  

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“Employment increased by 272,000 in May, higher than the average monthly growth of 232,000 over the past 12 months and above market expectations of a 180,000 monthly gain. Estimates for the prior two months were marked down slightly.  Job gains continue to be concentrated in the service sector, particularly healthcare and leisure and hospitality. Wage growth increased in May, with average hourly earnings up 4.1% over the last year.

“Despite these signs of strength from the establishment survey, the household survey indicated a weaker job market. The unemployment rate increased to 4%, and households reported a 408,000 decline in employment.

“Although this report is not uniformly strong, on net, it is showing a job market that is still quite tight, which likely means that the Federal Reserve will continue to hold at its current level of rates, as inflation is unlikely to drop back to target given this pace of wage growth. MBA is forecasting a first rate cut in September of this year.”