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The U.S. economy added 272,000 jobs in May, and the unemployment rate increased slightly to 4%, the U.S. Bureau of Labor Statistics reported Friday. 

The job gains in May were substantially higher than the 232,000 average monthly gain of the past 12 months. Wages increased 0.4% in May and are now 4.1% higher compared to a year ago. 

The unemployment rate rose slightly from 3.9% in April to 4% in May. This is the first time that the national unemployment rate has hit 4% in more than two years. 

Employment continued to trend up in May in several industries, led by healthcare (+68,000); government (+43,000); leisure and hospitality (+42,000); and professional, scientific, and technical services (+32,000).  

There was little or no change over the month in other major industries, including construction; manufacturing; wholesale trade; transportation and warehousing; information; financial activities; and other services.  

The Federal Reserve Board, which has held interest rates at a two-decade high to try to bring down inflation, has been looking for a gradual cooling of the labor market. However, Friday’s jobs report showing strong hiring and wage growth could raise inflationary concerns that may prompt the Fed to delay cuts to interest rates that were widely expected to occur later this year. 

The stock market initially opened lower after the strong jobs report was released but recovered those early losses a few hours later. 

The latest Employment Situation report also revised downward the preliminary jobs data for March and April to show that gains were actually 15,000 lower for that two-month period than previously reported. The change in payroll employment for March was revised down by 5,000 (from +315,000 to +310,000), and the change for April was revised down by 10,000 (from +175,000 to +165,000).