U.S. employers add modest 138K jobs; rate dips to 4.3 percent

U.S. employers add modest 138K jobs; rate dips to 4.3 percent

WASHINGTON - Job growth slowed sharply in May to just 138,000, the Labor Department said Friday, an unexpectedly lackluster figure that raises concerns about the labor market but probably not enough to derail an expected Federal Reserve interest rate hike this month.

The decline in the unemployment rate came as the number of people outside the labor force - neither working nor looking for work - increased in May.

Average hourly earnings for private-sector workers increased by 0.2 percent from a month earlier in May.

The government's report suggested that eight years into the recovery from the Great Recession, job growth may be slowing after a long stretch of robust gains. That puts average monthly job growth over the past quarter (March through May) at only 121,000 jobs, down by more than 50,000 jobs monthly from the same growth rate of 186,000 jobs/month over the one-year period from May 2016 through April 2017.

The manufacturing sector lost 1,000 jobs in May, breaking a five-month streak of factory job growth.

Fed officials indicated last week a rate hike would be likely if the economy stayed on track. That is far lower than previously reported, but sufficient to provide jobs to a growing population, if not to draw in dropouts. The falling U-6 points to a strengthening economy despite weak growth during the first three months of the year.

Economists had expected job gains of about 185,000 in May. Wage growth is tracked closely by economists for signs of inflation cropping up in the economy. While there can be significant variation, the ADP is generally viewed as predicting the path of the jobs report, and its strong showing caused some economists to revise upward their estimates for Friday's report.

Numerous jobs that have been added over the past year are in the generally lower-paying leisure and hospitality industry — hotels, restaurants and amusement parks. The U-6 has declined since January, an encouraging sign that jobless people who had given up hope of working are now being hired.

Staffing Industry Analysts' Perspective: Total nonfarm jobs growth in May fell short of the +182K median forecast of economists surveyed by Bloomberg, though we would note that some deceleration in the volume of monthly additions is to be expected as the economy nears full employment. Among 205,000 new service-providing jobs, the largest gains were in professional/business services (up 88,000 jobs), trade/transportation/utilities (up 58,000 jobs) and education/health services (up 54,000 jobs), it said. Americans were found to be earning more in wages with the past 12 months seeing as the hourly rose of 2.5%.

The May report from the U.S. Bureau of Labor Statistics has something for everyone: Good indicators, bad indicators, and a near-historic low in overall unemployment. The y/y growth rate in temp help accelerated to its strongest pace in almost two years, at 4.9%, and the temporary penetration rate continues to edge into new high territory.

After relatively modest job growth of 174,000 for April, May brought a serious nosedive.

"Fed officials have noted the weakness in inflation numbers of the past few months but have been willing to discount it as temporary", said Michelle Meyer, senior USA economist at Bank of America Merrill Lynch.

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