FILE - A worker at Reata Engineering and Machine Works programs a Mazak Variaxis machine used to make semiconductor pieces on Feb. 15, 2024, in Englewood, Colo. On Friday, June 7, 2024, the U.S. government issues its May jobs report. (AP Photo/David Zalubowski, File)



WASHINGTON (AP) — In May, U.S. employers added a robust 272,000 jobs, an increase from April, indicating that businesses remain confident in the economy despite high interest rates. This job growth, fueled by consumer spending on travel, entertainment, and other services, suggests steady economic expansion. For example, U.S. airports experienced near-record traffic over Memorial Day weekend. A strong job market typically boosts consumer spending, the main driver of economic growth. While some recent signs had hinted at economic weakness, the May jobs report alleviates some of those concerns.

However, the report did reveal potential signs of a slowdown. The unemployment rate edged up for the second consecutive month to 4% from 3.9%, ending a 27-month streak of unemployment below 4%.

President Joe Biden highlighted the jobs report as evidence of the economy's health under his administration, criticizing congressional Republicans for policies he claims would worsen inflation. Meanwhile, presumptive Republican nominee Donald Trump has focused on Biden’s economic policies, blaming them for inflation, which remains a significant concern for voters. At a rally in Phoenix, Trump linked higher prices to illegal immigration, a claim most economists dismiss.

Economists interpret the mixed signals from the jobs report—a rise in jobs alongside a slight increase in unemployment—as a sign of the job market normalizing post-pandemic. After a severe pandemic-induced recession that saw unemployment soar to nearly 15%, hiring surged in 2022 and 2023 as the economy recovered, and wages increased as businesses competed for workers.

"Employment growth is continuing at a solid pace, but the labor market heat of recent years has largely dissipated," said Sarah House, an economist at Wells Fargo.

While the number of open jobs has decreased to a three-year low and fewer workers are quitting, it has become easier for employers to fill positions. However, hourly wage growth accelerated last month, which, while beneficial for workers, could contribute to sustained inflation. Wages rose 4.1% from a year ago, surpassing the inflation rate. Some companies might raise prices to offset higher wage costs.

The Federal Reserve, focused on controlling inflation, is likely to delay any rate cuts while monitoring economic data. Most economists predict no rate reductions before September. Lower rates would reduce borrowing costs for consumers and businesses, including mortgages and auto loans. Fed Chair Jerome Powell expects inflation to ease further but needs more confidence in reaching the 2% target before cutting rates. Annual inflation has decreased to 2.7% from over 7% in 2022.

"This report complicates the Fed's task," said Julia Pollak, chief economist for ZipRecruiter. "There are no clear signals that a rate cut is appropriate soon."

May's job gains were broad-based, with significant increases in health care (84,000 jobs), restaurants, hotels, entertainment (42,000 jobs), government (43,000 jobs), and professional services (33,000 jobs).

Recovia, a health provider in Phoenix, plans to open three new clinics, each employing 12 to 14 people, said CEO Lance Fritz. Hiring administrative workers has become easier, but competition remains stiff for clinicians. Employees have received higher pay due to inflation and high housing costs in Phoenix. The company is also considering using AI to automate some tasks.

A potential concern in the May report was a decrease in the labor force participation rate from 62.7% to 62.5%, primarily due to retiring baby boomers. A surge in immigration has increased the workforce, supporting job growth. Despite fewer job openings, layoffs remain at a two-decade low, contributing to net job gains.

"Employers are hiring slowly and firing slowly," Pollak said. "Workers are switching jobs more slowly."

Shane Bombara, a 32-year-old from Pittsburgh, has experienced the gradual hiring pace. After being laid off in April, he found fewer job openings and more competition in his field. He has applied for 104 jobs, received three interviews, and faced many impersonal rejections.

"It's demoralizing to receive canned rejection emails," Bombara said. "You start to wonder, 'What's wrong here?'"

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