Employers added 172,000 jobs last month as US job market shows resilience despite Iran war
Employers added 172,000 jobs in May; It was roughly double what forecasters predicted, and the unemployment rate remained at a low 4.3%.
The Labor Department reported Friday that job growth fell slightly last month from a revised 179,000 in April. Unemployment rate remained at 4.3 percent
Hiring rebounded this year from a dismal 2025, showing resilience in the face of economic uncertainty caused by the Iran war and painfully high energy prices.
Last month’s employment gains were broad-based. Local governments added 55,000 workers, restaurants and bars added 48,000 workers, and healthcare companies added 35,000 workers.
In another sign of the job market’s strength, Labor Department revisions added a combined 93,000 jobs in March and April. Job growth averaged 188,000 people per month from March to May, marking the best quarterly hiring since early 2024.
“The hiring recession is over. American companies are hiring again,” said Heather Long, chief economist at Navy Federal Credit Union. “Jobs are rebounding in nearly every industry… This is encouraging news for job seekers and the U.S. economy. The labor market has stabilized and is showing the first signs of a real recovery.” Despite the increase in hiring, wage gains were modest, which could reassure inflation warriors at the Federal Reserve. Average hourly wages are up against the Fed’s 2% inflation target. Consistently up 0.3% from April 2025 and 3.4% from May 2025.
Financial markets fell after the report came out; This likely reflects expectations that the Fed will not need to cut interest rates this year because hiring is so healthy.
Workers, job seekers and employers are stuck in a strange labor market where there is “no hiring, no shooting.” “Those who have jobs stick with them, and those who don’t remain unemployed,” wrote Diane Swonk, chief economist at tax and consulting firm KPMG, in a commentary ahead of the jobs report. “The result is a sense of being frozen or left in a kind of labor market purgatory.”
Many young people find it difficult to break into a stagnant job market. Dismissed workers are struggling to return to work. In April, nearly 28% of the unemployed had been unemployed for more than six months; this is the largest rate since December 2021.
Seeing their hopes diminish, Americans are reluctant to quit their jobs and seek better employment elsewhere. In April, the number of people quitting smoking fell to the lowest level since the frightening days of August 2020, when COVID-19 was rampant.
Last year, employers added 9,700 new jobs per month; this was the lowest number outside of the recession since 2002.
Hiring has rebounded this year, averaging 114,000 new jobs per month from January through May. The massive tax rebates, the product of President Donald Trump’s 2025 tax cuts, have provided a boost to the economy, offsetting the impact of rising energy prices since the United States and Israel attacked Iran in late February. But the refunds were mostly pocketed, and gas prices remained above $4 per gallon.
Healthcare companies increased most hiring last year.
Martha Gimbel and Ryan Nunn of the Yale University Budget Lab note that strong health care uptake is not surprising as Americans age and need more prescriptions and doctor visits. In fact, employment growth in the sector is in line with the Department of Labor’s estimates a decade ago. “The question is not why health care is hiring, but why other sectors are not,” they wrote in a report released Tuesday, suggesting that one explanation could be immigration restrictions that reduce the supply of foreign-born workers.
At least the US doesn’t need as many new jobs. The decline in immigrants and the increase in Baby Boomer retirements means fewer people are competing for jobs. As a result, the number of new jobs needed to keep the unemployment rate steady, called the break-even point, has fallen from the typical level of 155,000 new jobs per month two or three years ago to possibly near zero, according to the Federal Reserve report.
Some analysts fear that AI will eliminate entry-level jobs. But the adoption of artificial intelligence “is proving to be more gradual and costly than many expected,” economists Gregory Daco and Lydia Boussour of tax and consulting firm EY-Parthenon wrote in a commentary Tuesday. Companies are increasingly using artificial intelligence to increase efficiency and control labor costs. But they wrote that AI reduces hiring rather than “triggering broad-based layoffs.”
A new study from the Federal Reserve Bank of New York has identified a different culprit for young people’s struggle to find jobs after college: the rise of remote work. It seems that businesses are reluctant to hire new graduates for work-at-home jobs because it is harder to train and mentor them when they are not in the office.
