Hiring surged last month as U.S. employers added 339,000 jobs, far above expectations, according to a report from the Labor Department on Friday.

The job gains for March and April were also stronger than previously reported. The April jobs figure was revised up by 41,000, while the March number was revised up by 52,000.

The strong jobs numbers indicate the U.S. jobs engine continues to chug along, with substantial hiring in business services, health care and hospitality.

Construction companies added 25,000 jobs last month even as high interest rates have weighed on the housing market.

The unemployment rate, which is compiled from a separate survey, paints a less rosy picture.

Unemployment, which been at a half century low, inched up in May to 3.7%. Meanwhile, the jobless rate among African Americans rose to 5.6%, after falling to a record low in April.

The stronger-than-expected job gains in May extend the labor market's red-hot streak and that's bound to reinforce concerns about inflation.

While a tight job market is good for workers, it can put upward pressure on prices, making it harder for the Federal Reserve to restore price stability. Average wages in May were 4.3% higher than a year ago.

The jobs report is one of several factors the Fed will need to consider as it decides whether to continue raising interest rates when policymakers meet later this month.