For the second month in a row, U.S. employers stunned economists by adding way more jobs in May than they expected.
Total nonfarm payroll employment rose by 172,000 last month, leaving the unemployment rate unchanged at 4.3%. While that total was slightly down from the upwardly revised 179,000 jobs added in April, it is more than double the Dow Jones consensus estimate for 80,000.
The leisure and hospitality, local government, and health care sectors led the way in job gains, while financial activities shed more jobs than they added in the month.
There are 7.3 million unemployed Americans, according to the Bureau of Labor Statistics report. The number of long-term unemployed, people who’ve been jobless for 27 weeks or more, remained steady month to month at 2 million, but is up by 524,000 year over year. The long-term unemployed accounted for 27.5% of all unemployed people in May.
But according to some economists, the unexpectedly bright picture the jobs report is painting, there is a dark side to the economy that is also getting worse.
Wage growth and stubborn inflation overshadow May job growth
Despite the strong May jobs numbers, all three major indices dropped significantly on June 5, with the Nasdaq tumbling nearly 3%, its worst intraday showing in nearly eight months. The S&P 500 declined 1.7%, and the Dow Jones Industrial Average declined 0.8%.
Maybe investors were as unimpressed with the top-line economic numbers from the jobs report as EPI senior economist Elise Gould was. Gould took to Bluesky to highlight that despite the 172,000 jobs added in the month, nominal wage growth “continued to decelerate, further exacerbating affordability as prices rise.”
Gould highlighted that since President Donald Trump took office in January 2025, the manufacturing sector has shed 68,000 jobs, and the federal government has cut another 333,000 jobs.
But the biggest red flag for Gould is stagnating wage growth.
“Nominal wage growth continued to slow in May, now 3.4% over the year. While we don’t get May inflation data until next week, it’s very likely, given recent trends, that real wages will continue to fall and workers and their families will find it increasingly difficult to make ends meet,” Gould said.
Gould wasn’t the only economist to check under the hood of the May jobs numbers and find signs of weakness.
Topline May jobs numbers hide worrying issue
The 172,000 nonfarm payroll jobs the U.S. added in May blew expectations out of the water by more than double, but the topline number is masking a big issue that few people are talking about: labor underutilization.
The Center for American Progress defines labor underutilization as the number of people who could be in the labor force and potentially employed full-time if conditions were better.
Underutilization falls into five categories.
- Those in the labor force but not actively searching for a job in the past four weeks
- Those not in the labor force (neither working nor actively looking for a job)
- Marginally attached workers, a subset of not in the labor force who want a job and have looked for work in the past year, but not in the past four weeks.
- Discouraged workers, a subset of marginally attached workers who have given up searching, specifically because they believe no jobs are available for them.
- Part-time workers for economic reasons who want full-time work but can’t find it.
According to the Center for American Progress, since President Trump took office in 2025, there has been a “rapid acceleration” of people falling into the underutilized categories.
In August and September 2025, those who were not in the labor force but wanted a job made up 6% of the total people in that category, it was a level that hadn’t been reached since September 2021. As of May 2026, the three-month rate still stands at 5.8%, 0.4% higher than the 2018-2019 pre-pandemic average.
While that 0.4% doesn’t sound like a lot, it actually represents an additional 1 million Americans.
But since these people are not actively looking for jobs, the headline unemployment rate does not count them.
“Across all measures of underutilization, labor market conditions today remain worse than pre-pandemic norms,” Center for American Progress study authors Jazmine Amoako and Sara Estep said. “As of May 2026, the broadest measure of labor underutilization, the U-6 unemployment rate, stands at 8.1 percent, significantly higher than U-3 headline unemployment, at 4.3 percent.”
The U-6 unemployment rate, which is often referred to as the “real unemployment rate,” is 8.9% above its pre-pandemic average, suggesting that more Americans who have managed to stay in the labor market are settling for involuntary part-time work.
May’s job report offers another positive headline number, but underlying measures tell a less celebratory story for Americans. Although job growth has returned and the unemployment rate remains stable, compared with just a few years ago, a growing share of Americans want work but have stopped searching or are stuck with part-time hours they didn’t choose,” Amoako and Estep said.
“And for those who do find themselves out of work, longer spells of unemployment are becoming the norm and remain above pre-pandemic levels. These weaker trends reflect the labor market reality for a growing number of Americans who are not thriving.”
Related: Discount retail giant cuts 100s of jobs after customer shift