May Payrolls Surge 172,000, Dwarfing Forecasts and Bolstering Fed Hawks' Case for Rate Hikes

U.S. employers added 172,000 jobs in May, nearly doubling the 88,000 consensus estimate and keeping the unemployment rate steady at 4.3%, the Labor Department reported Friday. The robust data shifts the Federal Reserve’s focus squarely onto inflation and strengthens hawks’ arguments for resuming interest rate increases later this year. Payroll gains for March and April were revised up by a combined 93,000, lifting the three-month average to over 188,000. “Providing the labor market does not suffer a dramatic summer jobs scare again, then it looks increasingly likely that the FOMC will enact a couple of insurance hikes later this year,” said Stephen Brown, chief North America economist at Capital Economics. New York Fed President John Williams said this week that inflation risks have risen “significantly,” while Dallas Fed chief Lorie Logan warned she is “increasingly concerned” higher rates may be needed to restore price stability. Fed officials receive one more inflation reading on June 10 before they meet June 17 to set rates.