Strong Job Growth Posted in May; Unemployment Rate Steady at 4.3%
By Reuters | 05 Jun, 2026

Rising business confidence after Trump "Liberation Tariffs" were struck down contributed to robust hiring that added 172,000 nonfarm jobs despite continuing uncertainty from the Iran conflict.

The U.S. economy posted another month of strong employment gains in May, confirming that the labor market was gaining traction after stumbling last year, and potentially giving the Federal Reserve more room to keep interest rates unchanged amid rising inflation stemming from the war with Iran.

Nonfarm payrolls increased by 172,000 jobs last month after rising by an upwardly revised 179,000 in April, the Labor Department's Bureau of Labor Statistics said in its closely watched employment report on Friday. Economists polled by Reuters had forecast payrolls increasing by 85,000 jobs after a previously reported 115,000 rise in April.

Estimates for job growth ranged from 50,000 to 125,000. The increase added to gains notched in the prior two months.

Economists estimated the economy needs to create between zero and 50,000 jobs per month to keep up with growth in the working-age population. The so-called break even rate has dropped because of an immigration crackdown that has reduced the labor force, limiting the rise in the unemployment rate.

The jobless rate remained at 4.3% for a third straight month. The improvement in payrolls mostly reflects low layoffs. Businesses have been cautious about boosting hiring as they deal with uncertainty, first from President Donald Trump's sweeping tariffs last year and now the U.S.-Israeli war with Iran.

There are so far no indications that the Middle East conflict, which has unleashed a surge in oil prices and other products shipped through the Strait of Hormuz, is having a material impact on the jobs market.

Fiscal stimulus, in the form of tax and tariff refunds, has bolstered corporate profits and allowed businesses to refrain from large-scale firings, economists said.

The U.S. Supreme Court in February struck down the tariffs, and some businesses have filed for refunds. Corporate profits increased by $40.4 billion in the first quarter and have been rising since the second quarter of 2025.

Despite the strength in payrolls, the labor market remains in what economists have termed a "slow-hire, slow-fire" equilibrium. Financial markets expect the U.S. central bank to leave its benchmark overnight interest rate in the 3.50% to 3.75% range into 2027.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)