U.S. adds 172,000 jobs as inflation pressures build

U.S. employers added 172,000 jobs in May, a stronger-than-expected gain that showed the labor market holding firm even as rising energy prices and inflation tied to the war with Iran intensified pressure on the economy.

The unemployment rate held steady at 4.3%, the Bureau of Labor Statistics said Friday. The report exceeded forecasts: economists polled by FactSet had expected 105,000 new jobs, CBS News reported, while The Guardian reported that economists had initially predicted about 80,000.

The government also revised prior months higher. March payrolls were raised by 29,000 jobs and April by 64,000, a combined increase of 93,000. CBS News reported the revisions brought March and April job gains to 214,000 and 179,000, respectively.

“This is a blowout jobs report,” Olu Sonola, head of U.S. economics at Fitch Ratings, said in an email cited by CBS News. “Hiring remains narrow, but the headline strength is enough to keep the Fed focused on inflation. With inflation already accelerating, the bigger risk is rising price pressure — not a sustained weakening in labor demand.”

Sonola added: “That makes it much harder to argue for lower interest rates anytime soon.”

The gains were concentrated in several sectors. Leisure and hospitality added 70,000 jobs, far above its average monthly gain of 14,000 over the previous 12 months. Local government employment rose by 55,000, and health care added 35,000 jobs. Education and health care have been among the largest contributors to job growth over the past year.

Other parts of the economy weakened. Financial services shed 22,000 jobs in May. Transportation and warehousing also remained under pressure, with the sector down by 92,000 jobs since reaching a peak in February 2025, according to the Bureau of Labor Statistics.

The hiring strength comes as wages trail price growth. Average hourly earnings rose 3.4% from a year earlier, while annual inflation jumped to 3.8% in April, its highest level in nearly three years. The government is scheduled to release the May inflation report next week.

Energy prices have surged since the United States and Israel launched the war with Iran on Feb. 28. The average retail gasoline price has risen more than 40%, while the price of U.S. crude oil has increased more than 35%. Diesel prices have climbed 55%, a concern for economists because diesel is used in shipping, farming, transportation and construction and can push costs through supply chains.

Wholesale inflation also accelerated sharply. Prices businesses pay other businesses for goods and services rose 6% in April, up from 4.3% in March, according to Bureau of Labor Statistics data released May 13.

The report sharpened attention on the Federal Reserve, which is scheduled to make its next interest rate decision on June 17, during Kevin Warsh’s first meeting as chair. President Donald Trump appointed Warsh and has pushed for lower rates.

Financial markets moved quickly after the jobs report. U.S. Treasury yields rose and stock futures fell. Fed rate futures indicated traders saw a more than 60% chance of a rate increase in October and a more than 98% chance by the Fed’s December meeting.

“If Chair Warsh pushes for cuts at his first meeting, he will be pushing against the evidence,” said Seema Shah, chief global strategist at Principal Asset Management.

Fed officials have recently voiced concern about inflation. “If recent data trends continue, it may soon be appropriate for policy to act to address the growing risks of persistently elevated inflation,” said Beth Hammack, president of the Federal Reserve Bank of Cleveland. She added that “monetary policy may not be sufficiently restrictive to bring inflation down to 2%.”

Fed Gov. Lisa Cook said last week: “I want to be clear about my risk assessment: The risks remain tilted toward higher inflation.” Cook also said trillions of dollars in artificial intelligence investments could cause another price shock, as prices for data center equipment, computer memory and chips have soared over the past year.