NEW YORK – The United States labor market gave mixed signals in May, with a decline in the unemployment rate to a 16-year low contrasting with below-forecast hiring and wage growth, the U.S. Bureau of Labor Statistics figures showed Friday.
Highlights of Employment (May)
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Payrolls rose 138,000, short of an estimated 182,000 increase. Unemployment rate, derived from a separate survey of households, fell to 4.3% from an estimated 4.4%. Average hourly earnings climbed 2.5% year over year, 0.01 percentage points less than expected.
Key Takeaways
Cooler hiring may partly reflect the challenge of finding skilled and experienced workers amid a tightening job market. It may also be a sign businesses are reluctant to expand their workforce until they see more evidence the new administration’s plans are translating into legislation that’ll reduce taxes and spur growth.
The decline in the unemployment rate – while a sign of a tightening job market – was also due to a drop in the size of the labor force, as the number of people classified as employed and unemployed fell by roughly the same amount.
Even with the figures, economic growth is likely to rebound this quarter and the U.S. is near full employment, helping explain why Federal Reserve policy makers are expected to raise interest rates when they meet June 13-14. Sustained hiring amid a shortage of skilled workers should eventually lead to an acceleration in wages.
One calendar quirk that may have depressed wage gains in May was that the 15th of the month – when workers who are paid semi-monthly get their checks – fell on the Monday after the survey week, which includes the 12th. This has distorted the wage readings in the past.
Economist Views
“I wouldn’t worry too much about monthly payrolls,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, said before the report. “The labor market continues to be tight.” Jobless claims indicate “there’s no sign of any significant weakening in demand for labor.”
Other Details
Participation rate, or share of working-age people in the labor force, decreased to 62.7 percent from 62.9 percent The U-6 or underemployment rate fell to 8.4 percent, lowest since November 2007, from 8.6 percent; rate includes part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking The measure known as part-time for economic reasons fell by 53,000 people to 5.22 million Private employment rose by 147,000 (forecast was 175,000) after a 173,000 increase; government payrolls fell by 9,000 Factory payrolls fell by 1,000, construction was up 11,000; retail payrolls declined 6,100, the fourth straight drop; and leisure and hospitality employment rose by 31,000 Average work week for all workers unchanged at 34.4 hours (forecast was 34.4 hours)
Shobhana Chandra is a reporter for Bloomberg News.
