US hiring rose more than forecast in May, wages picked up and the
unemployment rate matched the lowest in almost five decades, indicating the
strong labour market will keep powering economic growth.
Payrolls
increased 223 000 following a revised 159 000 gain, Labour Department figures
showed on Friday.
The
median estimate of analysts surveyed by Bloomberg called for 190 000 jobs.
Average hourly earnings increased 2.7% from a year earlier, more than
projected, while the jobless rate fell to 3.8% from 3.9% to match April 2000 as
the lowest since 1969.
The
report reinforces expectations for Fed policy makers to raise interest rates
when they meet June 12 to June 13, and may spur bets on two more hikes this
year after that, rather than one.
Steady
hiring and lower taxes will bolster consumer spending, helping to support the
projected rebound in US growth this quarter and continuing to trim the
unemployment rate. Wage gains, while positive in the latest report, have yet to
show a sustained acceleration.
“The job
market is red hot,” Ryan Sweet, an economist at Moody’s Analytics Inc. in West
Chester, Pennsylvania, said before the report. Still, “it’s only going to get
harder to find workers. We’ll see trend job growth begin to cool.”
President
Donald Trump tweeted an hour before Friday’s release that he was “looking
forward to seeing” the figures, spurring market speculation that the report
would be upbeat, and it was.
In
addition to payrolls topping economists’ forecasts, the unemployment rate had
been projected to remain at 3.9%, while wage gains exceeded estimates for 2.6%.
Upward pressure
The
jobless rate fell further below Fed estimates of levels sustainable in the long
run, a potential source of upward pressure on wages and inflation, according to
some economists.
The fiscal
boost from the Republican-backed tax cuts may also boost inflation at a time
when the economy is near full employment, while a protracted trade war, sparked
by Trump administration tariffs, would pose a growth risk.
Revisions
to prior reports added a total of 15 000 jobs to payrolls in the previous two
months, according to the figures, resulting in a three-month average of 179 000.
Economists
estimate that monthly payroll gains of less than 100 000 are sufficient to keep
pushing down the unemployment rate, which is derived from a separate Labour
Department survey of households and is near levels considered consistent with
at or below full employment.
The
payroll gains in May were fairly broad-based, with construction adding 25 000
jobs and manufacturing adding 18 000. Service providers boosted employment by
171 000, led by increases in retail; education and health services; leisure and
hospitality; and transportation and warehousing. Auto and parts makers and
temporary help services recorded declines.
The
number of employed people in the workforce rose by 293 000, the report showed,
while the number of unemployed decreased by 281 000, helping push down the
jobless rate.
Labour health
The
participation rate or share of working-age people in the labour force,
decreased to 62.7% from 62.8% the prior month. The employment-population ratio,
another broad measure of labour-market health, rose to 60.4% from 60.3%.
Fed
Governor Lael Brainard noted in a speech Thursday that the employment-to-population
ratio for prime-age workers remains about 1 percentage point below its
pre-crisis level.
The
participation rate remains a closely-watched measure for central bankers. While
improving prospects for employment and wages are helping attract people who
were on the side-lines of the job market, the retirements of older workers have
been exerting downward pressure on participation.
The tight
job market is helping lift worker pay. Average hourly earnings rose 0.3% from
the prior month, topping projections for 0.2%, following a 0.1% gain, the
report showed. The 2.7% gain for the 12 months ended in May followed a 2.6%
advance.
A
separate measure, average hourly earnings for production and non-supervisory
workers, was even more upbeat, increasing 2.8% from a year earlier, the most
since mid-2009. That followed a 2.6% gain in April.
Other details
• The U-6 underemployment rate fell to 7.6% from 7.8%; the gauge
includes part-time workers who’d prefer a full-time position and people who
want a job but aren’t actively looking.
• People working part-time for economic reasons fell by 37 000 to 4.95
million.
• Private employment rose by 218 000 after increasing 162 000;
government payrolls rose by 5 000.
• The average work week for all private employees was
unchanged at 34.5 hours.
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