U.S. economy added 172,000 in May, beating expectations amid inflation pressure

[00:00:00] Speaker 1: Some more breaking news this morning. A new snapshot of the labor market shows growth in an economy under pressure from inflation. The just-out May jobs report shows 172,000 jobs were added. That certainly beats expectations. The unemployment rate held steady at 4.3 percent as anticipated. But this comes as the president heads to a swing district area of Wisconsin for an event aimed at the state's farmers who are being squeezed by the Iran war and repercussions of Trump's past tariff policies. I want to bring in MS Now reporter Alex Tabbit, who joins us from a dairy farm in Westby, Wisconsin, and chief economist at KPMG, Diane Swank. Diane, I'm going to go first to you. Let's just dig into this jobs report. Those numbers more than double what economists expected. So is this a reflection of what Americans are feeling with the labor market right now? Or how [00:00:49] Speaker 2: do you explain it? We saw three sectors dominated. And no, it isn't a reflection of what most Americans are feeling. And I'll get to that in a second. Much of the job gains were more than 50,000 jobs in local government hiring, which have been absent. The federal government is hovering near 1966 levels of employment after shutting more than 350,000 jobs over the last year and a half or so. The more important issue was the eye-popping surge in leisure and hospitality and in health care. Health care has slowed, but leisure and hospitality added 70,000 jobs alone. Those are low wage jobs that are being supported by spending both through to the World Cup in host cities and hiring up ahead of those and the spending by well healed. We know the top third of wages have outpaced inflation, while the bottom two thirds of wage earners, middle and low income wage earners have gone underwater with regard to inflation in the month of May. Next week's inflation numbers are expected to come in at a 4.2 percent pace. Overall wage gains in this report were only 3.4 percent. Even though the unemployment rate held steady at 4.3 percent, which is low overall, that underemployment measure, the U6, held at 8.1 percent, down just a tick, but still almost two percentage points above where we saw pre-pandemic. That gets to the long-term unemployed, those unemployed more than 27 weeks, and new college grads are still struggling to get a foot into this labor [00:02:27] Speaker 1: market. So a lot that goes into these numbers behind the scenes. But Alex, where we go to you on the ground, the president is going to Wisconsin today. The third congressional district, a purple part of that battleground state, have done many a Trump trip to neighboring Eau Claire. But the president is back there to shore up voter support in these rural areas that have been really impacted by decisions he [00:02:47] Speaker 3: himself has made in the past year in office. That's right. We're here at a local dairy farm in Westby, Wisconsin, where equipment like this tractor is getting more and more expensive to operate. This tractor right now guzzles up to 50 gallons a day in gas alley. And here in the state of Wisconsin, gas used to be around $3.20 about a year ago. Now it's $5.30. That's how much more expensive it's gotten here. And what does that mean practically? That means that products which these beautiful animals, these 50 cattle, which is here at this dairy farm, products like milk, cheese, it's summertime. So the all important ice cream are more expensive to produce and are going to become more expensive to consume for everyday Americans. Now, I talked to Darren Von Rudin. He is the fourth generation farmer at this farm. He's also the president of the Wisconsin Farmers Bureau, about how the Trump administration's tariff policies and the war in Iran are impacting his day to day. I want you to hear what he had to say. [00:04:07] Speaker 4: If you could pick one word to describe how it feels to being a farmer right now in America, [00:04:12] Speaker 5: what would that one word be? Frustrated. And number one, because most of the situations have been caused by the administration's actions. When you have to try to figure out on a daily basis what's going on with your markets, what's going on with the products that you have to buy to keep your farm going, there's a real frustration of having to deal with something that's manmade. [00:04:40] Speaker 3: And Ali, Darren, the president of the Farmers Union here in Wisconsin, did note that President Trump did announce a $12 billion relief package to farmers last year. But he says that that relief package helps big farms much more than it helps small mom and pop family run farms [00:04:58] Speaker 1: like his. Alex, I just want to, I just want to drill down because you've more than earned your ice cream cone at the end of this live shot. But are these farmers connecting the prices to the policy and the [00:05:10] Speaker 3: politics in DC? They are, but there is a hope from a lot of farmers, both in the state that I just came from, Iowa, here in Wisconsin, that hope is on the horizon, that some of these trade deals will bear fruit, that President Trump will come good for them eventually. But right now, that hope seems [00:05:34] Speaker 1: a ways away. Ali. Alex, thank you. And Diane, just to follow up, I mean, you hear about all of these data and economic indicators. And the first question I ask is the Federal Reserve and what they do with it, because they're set to hold a key meeting to make a decision on interest rates. It'll be Kevin Warsh's first interest rate decision since becoming Fed chair. And we know the president's made no secret of his hopes for faster cuts. So given where all these economic markers are right now, what do you think [00:06:00] Speaker 2: we end up seeing? Actually, we've seen the hawks flock within the Federal Reserve. That is those pushing for a rate hike. In fact, some even using the verbiage soon in their analysis of the economy that one is needed. So that's the opposite direction. And that's going to be pushing back against efforts to cut rates in any way. We actually expect two rate hikes by the end of the year. Inflation is a problem that is the most regressive tax for consumers. It's compounded. The level of prices are out of reach for too many. It's also a labor market problem when it goes into input costs, like you saw with those farmers there. And we've seen farm delinquencies on loans actually pick up in the first quarter, which is another problem. And there's another wave of food inflation, which is really important for consumers as we see the fertilizer and the effects of the war become harvest seeds and into 2027. This is not going away [00:06:58] Speaker 1: anytime soon. No, we'll continue watching those ripple effects for sure. Diane Swank, Alex Tabbit before that. Thank you both. [00:07:14] Speaker ?: Thank you.