US labour market keeps Fed on fierce rate hike path

US employers hired more workers than expected in May and maintained a fairly strong pace of wage increases, signs of labour market strength that will keep the Federal Reserve on an aggressive monetary policy tightening path to cool demand.

The Labor Department's closely watched employment report on Friday also showed the unemployment rate holding steady at 3.6 per cent for a third straight month, even as more people entered the labour force. It sketched a picture of an economy that continues to expand, although at a moderate pace.

The US central bank's interest rate hike campaign and tightening financial conditions have caused anxiety among investors about a recession next year.

"The economy is miles away from being wrecked on the shores of recession with the economy continuing to hire workers at this fast of a clip," said Christopher Rupkey, chief economist at FWDBONDS in New York. "It is not slowing enough to put the inflation fire out. The Fed's work is not done."

The survey of establishments showed that nonfarm payrolls increased by 390,000 jobs last month. Data for April was revised higher to show payrolls rising by 436,000 jobs instead of 428,000 as previously estimated. While May's job gains were the smallest in a year, they were way above the monthly average that prevailed before the Covid-19 pandemic in 2020.

Employment now is just 822,000 jobs below its pre-pandemic level. Most industries with the exception of leisure and hospitality, manufacturing, healthcare, wholesale trade and local government education have recouped all the jobs lost during the pandemic.