U.S. employers added a healthy 390,000 jobs in May, extending a streak of solid hiring that has bolstered an economy under pressure from rising inflation and interest rates. There were notable gains in the transportation and warehousing industries.

According to the statistics released last week by the U.S. Labor Department, last month’s gain indicates a healthy job market despite concerns that the economy will be weakening in the coming months as the Federal Reserve steadily raises rates to fight inflation. The unemployment rate was unchanged at a low 3.6%, according to the most recent report from the Labor Department.

Businesses in many industries (including food and beverage manufacturing, retail and distribution) remain desperate to hire because their customers have kept spending freely despite intensifying concerns about high inflation. In fact, according to the member survey conducted last year by Food Shippers of America (FSA), the labor/talent shortage is one of top three pain points in the food chain industry.

The finances of American consumers have been buoyed by increasing compensation and an unusually large amounts of savings that were accumulated during the pandemic - particularly among higher-income households.

In addition, workers and employees are enjoying nearly unprecedented bargaining power. The number of people who are quitting jobs, typically for better positions at higher pay, has been at record highs for more than six months.

Also, the strength of the job market is itself contributing to inflationary pressures. With wages continuing to rise throughout the economy, food companies are passing on at least some of their increased labor costs to their customers through higher prices on grocery shelves, in restaurants, etc. Unfortunately the costs of food, gas, rent and other items — which fall disproportionately on lower-income households — are accelerating at nearly the fastest pace in approximately 40 years.

Rapid rate hikes by the Federal Reserve, which are on track to be the fastest in more than 30 years, are likely to weaken the economy. In an attempt to cool spending and slow inflation, the central bank raised its short-term rate last month by a half-point to a range of 0.75 percent to 1 percent - its biggest hike since 2000. Two additional half-point rate increases are expected yet this month and potentially in July. Some Fed officials have indicated in recent public discussions that if inflation doesn’t demonstrate signs of slowing, they may implement yet another half-point rate increase in September. The Fed’s moves have already sharply elevated mortgage rates and contributed to drops in sales of new and existing homes. The rate hikes have magnified borrowing costs for food businesses, which may respond by reducing their investment in new buildings and equipment, slowing growth in the process.

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