The U.S. economy added 172,000 jobs in May, well above analysts' expectations, according to a June 5, 2026 analysis from the Competitive Enterprise Institute responding to the Bureau of Labor Statistics' monthly jobs report. The unexpected increase signals an economy that's begun to pick up steam, though the Federal Reserve will likely hold off on interest rate cuts at its upcoming meeting as it continues fighting inflation.
The May gains were concentrated heavily in leisure and hospitality, which added 70,000 jobs—almost half of the month's total employment increase. The report also revised March and April's figures upward, adding a combined 93,000 jobs to those months. Meanwhile, federal government employment rose by just 1,000 jobs in May, marking only the second month-to-month increase since the Department of Government Efficiency (DOGE) began operations. As of April, DOGE had eliminated 348,000 federal jobs—11.5 percent of the workforce from its October 2024 level. The year-over-year picture shows the labor force growing by just 99,000 since April 2025, compared to population growth of more than two million. The unemployment rate stood at 4.3 percent, and economic growth was recently revised downward to 1.6 percent—below the 100-year average of just over 2 percent.
According to CEI Research Fellow Sean Higgins, the economy is "beginning to gain steam again thanks to attempts to wind down the Iran war and the relative calm on the tariff front." Higgins noted that the leisure and hospitality sector is "the economy's bellwether because it is one of the first places that consumers cut back in leaner times," and with summer approaching and the U.S. hosting the World Cup, employers in that sector are feeling more optimistic. CEI Senior Economist Ryan Young called this "the third month in a row with a decent jobs report, which is pretty good for an economy that is basically at full employment."
The CEI analysis emphasizes that these numbers should prevent the Federal Reserve from lowering interest rates at its June 16-17 meeting. Young explained that three months of jobs growth plus a 4.3 percent unemployment rate "indicates an economy that doesn't need any assistance from looser monetary policy." The concern is particularly pressing because inflation indicators now sit at almost double the Federal Reserve's target due to tariffs and the Iran war, making rate cuts risky. The leisure and hospitality surge suggests employers are betting on consumer spending through the summer, especially with major events like the World Cup drawing visitors. The trend in federal employment suggests the administration has deemed DOGE successful in its mission and is winding it down according to its original July 4, 2026 termination date.
The takeaway is clear: the economy is showing resilience with three consecutive months of solid job growth, but it's not strong enough to justify monetary stimulus—and with inflation still elevated, the Federal Reserve's hands are tied. Employers are cautiously optimistic heading into summer, but the gap between labor force growth and population growth signals underlying challenges that won't be solved by cutting interest rates.