MNI US Employment Insight: Payrolls Surge, Hike Seen This Year

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Executive Summary

Nonfarm and private payrolls growth was again comfortably stronger than expected in May, with most of the action on the establishment survey side of the report. May jobs growth may have been supported by the seasonal adjustment and a weather boost, but broader trends are still impressively strong. The unemployment rate in the household survey was as expected meanwhile, continuing its broad stabilization since the summer. A Fed hike has shifted to being priced for December from Mar 2027 beforehand, with Wednesday’s CPI report a next key input. 

• Nonfarm payrolls increased 172k (sa, cons 88k) in May following 179k in April and 214k in March after a strong two-month upward revision of 93k that has further solidified a healthy recent trend.
• It was boosted by rare strong public sector job gains of 52k in May (strongest single month since Jul 2024) and a two-month upward revision of 27k. However, private payrolls were also surprisingly strong at 120k and with a two-month upward revision of 66k.
• The cyclically insensitive health & social assistance category still increased a solid 47k in May but other private sectors increased 73k in May and notably accounted for 60k of the 66k private sector revisions.
• Job gains are still notably concentrated, with food & drinking places rising 48k along with a two-month upward revision of 34k, although in this case it is at least an encouraging sign for discretionary demand. Against that, job losses are concentrated in some AI sensitive industries such as financial activities.
• If there was a softer caveat to the payrolls figures it was that the more favorable seasonal factor this month could have accounted for a sizeable share of surprise for May although the report is still robust even allowing for that.
• It’s worth remembering that QCEW data released earlier this week implied a break from heavily negative NFP benchmark revisions of the past two years, potentially lifting payrolls by a crude ~20k/month.
• The household survey meanwhile can best be characterized as solid in comparison to the blowout establishment survey figures, with its unemployment rate at 3.40% after 4.34% in April.
• The continued broad stabilization in the unemployment rate since last summer (average 4.34% in 3Q25 before the government shutdown) suggests that dwindling breakeven estimates were overly pessimistic. It remains “pretty close to mainstream estimates of the natural rate” per then Fed Chair Powell in April.
• More broadly, along with a more favorable seasonal factor for May payrolls figures there might have also been a weather tailwind in May. The 16k reporting they weren’t at work due to bad weather in the household survey was its lowest in at least the last 30 years.
• Elsewhere, ADP and Revelio reports have also been showing solid monthly trends, albeit not to the same extent as BLS payrolls, whilst JOLTS job openings jumped in April but with a single industry driver.