Despite months of speculation over an impending recession, the May jobs report is here, and it is… shockingly good. The U.S. economy added more than 339,000 jobs in May, representing an unemployment rate of 3.7%. Is the oft-talked-about soft landing a real possibility?

Well, maybe. For the better part of the last year, economists have speculated that the Federal Reserve’s seemingly endless rate-hike campaign would eventually devolve into a mild recession in the second half of 2023. Even Fed economists think as much.

While metrics like individual spending, corporate profits and even consumer sentiment have shown mixed results over the past few months, jobs have remained strong. This is despite seemingly constant economic uncertainty.

From the debt ceiling crisis to the regional banking breakdown, there’s been no shortage of black swan catalysts in the U.S. economy this year. Yet, the economy’s resilience this far into the year has raised hope that a recession may not happen.

May Jobs Report Outperforms Estimates Despite Rising Unemployment

May’s job report increase represents the largest gain in the metric since January. And it’s way better than the 190,000 Dow Jones projection. While 3.7% unemployment is a notable increase from April’s 3.4% reading and above the 3.5% estimate, it’s still historically low. The increase in unemployment, despite the jump in jobs, is likely a symptom of a large change in self-employment.

Indeed, self-employment dropped 369,000 in May, contributing to a 310,000 decrease in the number of employed in the household survey, a more volatile metric used to calculate the unemployment rate.

In fact, given that unemployment increased despite rapidly rising job creation, the unemployment rate may be a symptom of more people looking for jobs. This is further validated by the labor force participation rate, which has held steady at 62.6% since March, up from January’s 62.4% reading.

“The U.S. labor market continues to demonstrate grit amid chaos — from inflation to high-profile layoffs and rising gas prices,” Becky Frankiewicz, president of Manpower Group, told CNBC. “With 339,000 job openings, we’re still rewriting the rule book and the U.S. labor market continues to defy historical definitions.”

Professional and business services contributed the most to the stellar jobs numbers, adding 64,000 net new hires. Government and health care added 56,000 and 52,000 jobs, respectively.

The only weakness in the May jobs report was the average weekly hours worked. The figure slid to 34.3 from 34.4, the lowest level since early in the pandemic.

Data Shows Soft-Landing May Be a Possibility, Though Danger Remains

Last week’s jobs report has confirmed that there may be reason to remain optimistic after all. Jobs remain strong, the sometimes-terrifying debt ceiling deal is finally heading to President Joe Biden’s desk to be passed into law, inflation has been slowly but surely easing, and consumer spending hasn’t quite taken the dive some have projected.

On the latter point, consumer spending has been one of the most encouraging economic metrics, although not without some controversy. If you recall from the mid-May advanced sales report, consumer spending rose 0.4% in April. That was the first positive reading since January and followed March’s 0.7% decline. However, some consumers are evidently maintaining their spending via savings accounts or credit cards, a worrisome potential indicator.

Now, while things may seem promising overall, there are some points of concern. While traders are currently pricing in a 26% chance of a Fed rate hike in June, that doesn’t eschew the fact that the central bank has already raised rates 10 times in the past year or so.

It can take 12 to 18 months for rate hikes to fully work their way into the economy. Meanwhile, unemployment is famously sticky, as one of the last economic indicators to feel the effects of elevated interest rates.

As much as optimism rules the day, the possibility that the Fed’s rate hikes simply haven’t been completely digested by many economic indicators, namely unemployment and consumer spending, can’t be ignored.

“We’re still seeing a labor market that’s gradually cooling,” Sarah House, an economist at Wells Fargo told the New York Times. “But it’s at a glacial place.” While the May jobs report may have raised hopes that a soft landing is possible, the fight isn’t over.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.