The U.S. 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, Labor Department figures showed Friday.
Payrolls rose 138k; March-April revisions subtracted 66k jobs. The unemployment rate, derived from a separate survey of households, fell to 4.3% (est. 4.4%) from 4.4%. Average hourly earnings rose by 0.2% over the previous month, climbing 2.5% year over year.
The manufacturing sector lost 1,000 jobs in May, breaking a five-month streak of factory job growth. The Commerce Department reported that the goods and services deficit reached $47.6 billion in April, up $2.3 billion. The goods deficit with China reached $32.1 billion.
"The loss of manufacturing jobs in May is a stark reminder of the challenges that face factory workers: declining auto sales, a persistently high goods trade deficit, and muddled fiscal policies," said Alliance for American Manufacturing President Scott Paul in a statement.
"While the administration has initiated several trade reviews that could level the global playing field, they have yet to bear fruit," he added. "Good public policy can support new job opportunities in manufacturing, but Congress is no closer to boosting infrastructure investment, and a pro-jobs tax reform effort seems like a fading possibility. Policy solutions require leadership."
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. Even so, with the revisions, the three-month average of payroll gains was the weakest since 2012.
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
“Job growth is a little disappointing, but enough to continue tightening the labor market,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “This doesn’t change the overall story of an economy that generally seems to be growing above trend and reducing slack.”
“This keeps the Fed on track” for a June interest-rate hike, said Feroli, who formerly worked at the central bank. The latest reading on payrolls is within a reasonable deviation of the recent trend, he said.
