The U.S. job market continued to show strength in May, offering another sign that the economy remains resilient despite concerns about rising prices and ongoing geopolitical tensions in the Middle East.
According to the latest employment report from the U.S. Department of Labor, employers added 172,000 jobs in May, significantly higher than economists had expected. The government also revised its estimates for March and April, showing that 93,000 more jobs were created during those months than previously reported.
The unemployment rate remained steady at 4.3% for the third straight month, suggesting that businesses are still holding onto workers and continuing to hire even as economic uncertainty persists.
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The strong labor market gives the Federal Reserve more flexibility to keep interest rates unchanged for now. Policymakers have been closely monitoring inflation, which has been pushed higher in part by rising oil prices linked to the conflict involving Iran. While some investors now see a greater possibility of a rate increase later this year, many economists believe the threshold for additional tightening remains high.
“This report is likely to confirm to the Fed that the labor market is in a stable place, allowing inflation to be the only focus and driver of Fed policy heading into the June meeting,” as per Sophia Kearney-Lederman, a senior economist at FHN Financial, cited by Reuters.
Economists say several factors have helped support the economy. Tax refunds and tariff-related repayments have boosted consumer spending, while stronger corporate profits have allowed companies to avoid widespread layoffs. At the same time, immigration restrictions have slowed labor force growth, reducing the number of jobs needed each month to keep unemployment from rising.
Last year, uncertainty surrounding the Trump administration’s tariff policies made many employers cautious about expanding their workforce. Since then, hiring conditions have improved. Analysts note that the recent strength in the labor market is being driven not only by hiring but also by historically low levels of layoffs.
The leisure and hospitality sector led job growth in May, adding 70,000 positions. Restaurants and bars alone accounted for 48,000 new jobs. Some economists believe businesses may be staffing up ahead of the FIFA World Cup, which the United States will partially host.
Local governments added 55,000 jobs during the month, while healthcare employment increased by 35,000 positions, particularly in outpatient and ambulatory care services. Additional gains were reported in social assistance, mining, quarrying, and oil and gas extraction.
Not every sector saw growth, however. Financial services lost 22,000 jobs in May and employment in the sector has fallen by 107,000 jobs since reaching a recent high in May 2025. Insurance companies and commercial banks were among the areas reporting job losses.
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Wage growth showed signs of cooling, with average hourly earnings rising 3.4% from a year earlier, down from 3.6% in April. Meanwhile, inflation remains a concern. Government data released last week showed consumer prices rising at their fastest pace in three years.
Economists also caution that consumers could face growing pressure in the months ahead. Inflation-adjusted disposable income has declined for three consecutive months, and the household savings rate has fallen to its lowest level in four years. If those trends continue, consumer spending, one of the biggest drivers of the U.S. economy, could begin to slow.