The job market is much stronger than economists expected. Why?

The U.S. job market has defied all odds and continues to thrive despite facing numerous challenges over the past year. In May, employers added 172,000 jobs, surpassing analyst expectations and maintaining a healthy pace of job growth from the previous months. The average monthly job growth has tripled compared to a year ago, reaching nearly 190,000 this spring.

Despite obstacles such as high tariffs, the Iran war, inflationary pressures, public pessimism, and immigration restrictions, the labor market is displaying unexpected strength after a period of weakness in late 2025 and early 2026. Several factors contribute to this recent surge in job growth, with strong corporate profits playing a significant role. Corporate earnings in the first quarter increased by about 28%, and a majority of S&P 500 companies exceeded analysts’ profit expectations.

The Republicans’ “One Big Beautiful Bill,” which reduced corporate taxes and provided other incentives, has also contributed to boosting profitability. The health care industry has been a standout in terms of job creation, adding 610,000 jobs in the past year, followed by the leisure and hospitality sector with 240,000 new jobs. The increase in health care employment is largely driven by the aging population, particularly the baby boomer generation.

In addition to health care, hiring in leisure and hospitality has been robust, gearing up for the summer travel season and events like the 2026 World Cup. The May jobs report showed broad-based growth across various sectors, including local government, which added 55,000 jobs likely due to seasonal demand for summer activities and projects.

Despite the positive job growth numbers, many Americans remain pessimistic about their job prospects, with 7 in 10 believing it would be challenging to find a new job. The recent uptick in job growth has not fully improved the hires and quits rates, indicating underlying weaknesses in the labor market. Some industries have experienced job losses over the past year, including government and financial services.

Certain groups of workers, such as recent college graduates and laid-off individuals, are also facing challenges in finding employment. Nearly 28% of the unemployed in April had been without a job for more than six months, the highest share since December 2021. While the recent strong jobs report for May is promising, job seekers continue to struggle in certain sectors and demographics.

Overall, the U.S. job market is in a relatively good place, driven by strong corporate profits and job growth in key industries. Despite pockets of weakness and ongoing challenges, the recent surge in employment numbers offers hope for economic recovery and stability.