USA job growth came in below expectations in May, with employers adding just 138,000 jobs while the unemployment rate fell to 4.3 percent, the lowest it has been in more than 16 years, federal economists reported Friday morning.
USA job growth continued in May with unemployment hitting its lowest level in 16 years, likely paving the way for the Federal Reserve to hike interest rates again in a couple of weeks.
The labor force participation rate declined by 0.2 percentage point to 62.7 percent in May, but the government said it has shown no clear trend during the past 12 months.
Average hourly earnings, a closely-watched metric, rose 0.2% during the month, as expected, putting year-over-year wage gains at 2.5%. March's was revised to 50,000 from 79,000, and April's to 174,000 from 211,000.
While the number of new jobs created in May was below the 180,000 that economists had been expecting, the United States has now added jobs for 80 consecutive months. Employers have added more than 2 million jobs in the past year, and a month or two of slow growth isn't unusual.
Employment in other major industries, including construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, and government, showed little change over the month. Payroll processor ADP estimated that businesses added 253,000 jobs last month. Economists surveyed by Bloomberg expect an increase of 180,000 in non-farm payrolls.
The overall participation in the labor force has trudged along below 63 percent during the recovery, down from over 66 percent before the recession. The White House is preparing for a fight over raising the federal debt limit and approving government funding that, if not resolved, could rock the USA economy and global stock markets and cause the Fed to put its plans on hold.
Duncan said the unemployment rate dropped to the lowest it has been in 16 years. Data on consumer spending and manufacturing suggest the economy gained speed early in the second quarter after gross domestic product increased at a tepid 1.2 percent annualized rate at the start of the year.
"There is not going to be a big turnaround in wage growth until productivity picks up", said Andrew Chamberlain, chief economist at the jobs site Glassdoor.
Still, the middling job growth will likely still be enough to prompt the Federal Reserve to raise interest rates when the Board of Governors meets later this month. Hospitals added 7,000 jobs over the month, and employment in ambulatory health care services continued to trend up (+13,000). That figure was above economists' expectations, due in part to a strong showing from the professional services, education and health, and construction sectors. As of Friday morning, traders saw a 93.5 percent chance of a rate hike.
"Firms are adding workers, creating new positions and increasing compensation to attract better applicants and keep their best performers", said NFIB Chief Economist William C. Dunkelberg. It would mark the first time the Fed raised the rate twice in a calendar year since 2006.