US job market looks solid 8 years after recession ended

Marcus Newton
June 3, 2017

Employers added a weaker-than-expected 138,000 jobs in May, undershooting forecasts of around 180,000. That was down a bit from April and was modestly below economists' expectations.

The signs of renewed vigor in the economy and labor market tightness could encourage the Federal Reserve to raise interest rates later this month.

But dig deeper into the report and the picture gets uglier.

Also discouraging is that job gains for March and April were revised down by 66,000. Over the year, average hourly earnings have risen by 63 cents, or 2.5 percent, BLS reported.

Then there is the retail sector.

Restaurants and health care firms posted solid job gains.

The for-hire trucking industry lost 100 jobs during May while the wider transportation and warehousing sector added 3,600, due largely to growth in rail transportation as well as transit and ground passenger transportation employment. Department stores alone have cut 18,600 jobs in that period.

"After more than 130 days in office, President Trump has yet to show us he is serious about creating jobs and raising wages across the country", said Sen. It plans to open 47 franchises before year's end, adding more than 400 jobs. But Jim O'Sullivan, chief US economist of High Frequency Economics, noted that seasonal adjustments can be especially tricky in May, prompting him to forecast just 140,000 employment gains.

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The 4.4 percent unemployment rate matches a decade low.

But Mark Hamrick, Bankrate.com's senior economic analyst, said that Trump "vastly overstated jobs creation since he took office and the assessment has only worsened with the arrival of a new day and the latest employment report". It's too soon to worry, but not too soon to start paying attention.

This has suggested that despite of the unemployment rate falling to a 16-year low of 4.3%, the labor market was losing momentum. "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".

The decline in the unemployment rate came as the number of people outside the labour force - neither working nor looking for work - increased in May. The labor-force participation rate fell to 62.7% in May from 62.9% in April. But that was largely for the wrong reason: About 429,000 people dropped out of the labor force.

Douglas Holtz-Eakin, head of the American Action Forum, said that while the unemployment rate fell, the report's household survey showed that employment fell by 233,000.

A solid overall report will nearly certainly clear the way for the Federal Reserve to raise rates again in June. But slowing hiring and softer inflation readings may give some officials pause.

Investors, however, still see a hike as likely.

Still, the modest growth, combined with the somewhat disappointing jobs figure, puts in question the Wall Street consensus that the Federal Reserve would raise the benchmark interest rate in June.

Other reports by MaliBehiribAe

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