June 5, 2026
Payrolls rose by 172,000 in May following an upwardly revised gain of 179,000 jobs for April. The initial report for April showed only 115,000 job gains. All of the increase came from the private sector. Government accounted for 52,000 of the gains, largely at the local level. That reverses what had been a streak of public sector job losses. Federal employment added a negligible 1,000 jobs during the month.
Federal government employment held at its lowest level since 1966 in May. Mass layoffs, hiring freezes, resignations and a surge in retirements last year hollowed out government agencies, leaving many short-staffed. Since the October 2024 peak, federal payrolls have dropped by roughly 350,000 jobs.
Leisure and hospitality added an eye-popping 70,000 jobs, mostly in food services and accommodation. That gain was the largest since January 2023 and had an extra lift from hiring triggered by the upcoming World Cup matches. Bookings in host cities have skyrocketed in recent months.
We saw 6700 job gains in performing arts, spectator sports and related industries. Broadway reported record ticket sales this season, another sign that the well-heeled are traveling and spending on experiences.
Healthcare and social assistance added 47,200 jobs, but the pace has decreased from 2024 and 2025. We have caught up from the pandemic-induced quits. Additional hurdles include cuts to Medicaid and a lapse in subsidies for the Affordable Care Act, which limits the ranks of the insured.
The largest cuts in Medicaid are slated for after the midterm elections in November and will hit in 2027. Those cuts, along with a surge in the cost of H-B visas to $100,000 for new applicants, will accelerate the closures of rural and poor urban nonprofit hospitals and clinics.
The goods sector posted smaller gains. Manufacturing added 7,000 jobs, more than half in the vehicle sector. Manufacturing surveys showed an expansion in May, fueled by restocking inventories. The comments on manufacturer surveys included front-running ahead of feared price hikes. That should make the Federal Reserve nervous; hoarding has a way of feeding its own inflation spiral.
Nondurable manufacturing shed 10,000 jobs. The losses were mostly in plastics, rubber products and food processing. A shortage of cattle and the residual blow to meat processing is adding to the weakness in food processing and buoying beef prices.
Construction benefited from the AI boom, with an additional 17,000 jobs with 11,000 in specialty nonresidential contractors. The latter are needed to do the finishing work on data centers. Shortages of electricians and engineers are becoming more acute, worsened by a wave of retirements that is thinning the ranks just as demand is accelerating.
Average hourly earnings rose 0.3% in May and added 3.4% compared to a year earlier, down from 3.6% in April. That leaves wage gains running nearly a full percentage point below inflation, if May CPI comes in at the 4.2% year-over-year pace expected. For households, that means another month of lost purchasing power.
Hours worked remain unchanged at 34.3 hours per week, which means we will not see much of an offset in weekly earnings. The data by income strata is more worrisome. Analysis by the Bank of America Institute suggests wage growth for low- and middle-income workers slowed to 3.1% and 3.5% in May, respectively. The top third of earners saw pay gains of 5.6%, comfortably outpacing inflation and widening the divide in who can keep up.
The break in wage gains shows up in the official data as well, with an acceleration in wages in information, financial activities, mining and construction wages. Professional and business services hit a three-month high.
Those gains came despite a lack of large employment gains, except for mining and construction. That suggests experienced workers are getting rewarded more than new hires, the opposite of what we saw during the hiring frenzy of 2022 and 2023.
Separately, the household survey showed the unemployment rate held at 4.3% in May, a rate the Fed considers close to full employment. Participation in the labor force held at 61.8%, with a small increase in prime-age participation offsetting a drop in the over-65 crowd.
The employment to population ratio increased a tick to 59.2%, That is the second lowest level we have seen since emerging from the pandemic.
The broader U6 rate, which captures discouraged workers and those stuck accepting part-time for economic reasons, edged down to 8.1%. Those accepting involuntary part-time jobs fell after spiking in April. That helped lower the U6.
The duration of unemployment rose, with a jump in the long-term (over 27 weeks) unemployment. Those unemployed for less than five weeks declined. It gets harder to find a job the longer one is unemployed.
Those who opted for part-time jobs increased during the month. That reflects an ongoing crisis in childcare. Mothers with more than a BA with young children are among the most likely to opt out of the labor force entirely.
Those out on vacation during May reached the second highest since 1996. That is another factor spurring hiring in leisure and hospitality. That was the second highest May on record for those out due to paternity leave; the highest May on record was in 2025. Some young adults are having babies.
The quit rate edged lower at the end of April, along with the premium for job hoppers. That suggests the spurt in hiring we are seeing is not enough to break us out of the low pace of labor turnover we saw emerge in 2025. Existing workers are clinging to their jobs, while new college graduates continue to struggle to get their foot in the door.
In April, the new college grad unemployment rate hit 5.6%. That is up significantly from the lows pre-pandemic and more consistent with the those we saw emerging from the global financial crisis in 2013.