The US job market is showing surprising strength, with payroll growth picking up again in May. According to Michael Cabana, Bank of America's Head of US Economics, the country is currently operating above its breakeven employment rate. This suggests that the number of jobs being added each month is more than what is needed to maintain a stable unemployment rate.
This resilience in the labor market is partly driven by strong corporate profits, which enable companies to hire. The healthcare industry has been a significant contributor to job creation, adding 610,000 jobs over the past year, while leisure and hospitality followed with 240,000 new jobs. Seasonal demand also played a role in May's hiring, with local government adding 55,000 jobs due to summer-related needs.
Bank of America's customer deposit data indicates continued growth in payrolls, particularly driven by gains in lower-income jobs. Unemployment payments into Bank of America customer accounts also show slowing growth, consistent with improvements in the labor market. While wage growth for lower and middle-income households is recovering, it still lags higher-income earners, with after-tax wage growth for lower and middle-income households at 3.1% and 3.5% year-over-year, respectively, compared to 5.6% for higher-income households in May.
