USA employers pulled back on hiring in May, adding only 138,000 jobs, though the gains were enough to help nudge the unemployment rate down to a 16-year low.
USA unemployment fell to a 16-year low in May, but monthly job creation has slowed sharply in the past three months, creating a mixed picture of the labour market.
But some sectors were shedding positions, with the struggling retail sector employing 6,100 fewer workers, and automakers losing 1,500, amid declining new vehicle sales.
Wages in May increased 2.5 percent from the year before, in line with the moderate growth they've shown in recent months.
But the Bureau of Labor Statistics report for May fell well short of expectations and the office cut its tally of employment gains in March and April by a combined 66,000 less than previously reported.
Despite the slowdown in job growth last month, the US economy is running neither too hot nor too cold, with growth holding at a tepid but far from recessionary 2 percent annual rate. But the 138,000 jobs added in May marked a sharp deceleration from the average monthly gain of 181,000 over the previous 12 months. And indeed, with unemployment at a near-historic low, wages are bound to rise. But with the labor market expected to hit full employment this year, there is optimism that wage growth will accelerate.
The drop in unemployment means the labor market is at or very near full employment - the point when virtually all workers who are seeking a job have found one. Even so, with the revisions, the three-month average of payroll gains was the weakest since 2012. Month-after-month job gains in the 200,000 range are not sustainable longer term.
Wages are up, but not as much as might be expected, he added. He said this because of a large decrease in the labor force that outpaced a decline in household employment. The unemployment rate has fallen by a 0.5 percentage point since then.
Restaurants and health care firms posted solid job gains. The two forces have more or less offset over the past year, with the participation rate bouncing around but not really moving either up or down.
Low productivity growth and the relatively low skill level of many American workers who are getting pulled into the labor market are likely holding back a more rapid increase in wages, Swonk said.
The jobs numbers likely clear the path for the Federal Reserve to raise interest rates later this month. The highest rate was in the Cleveland, Ohio, area, at 5.4 percent. That figure was above economists' expectations, due in part to a strong showing from the professional services, education and health, and construction sectors. Most other sectors, including manufacturing, wholesale trade, retail trade, and transportation and warehousing, saw little change, the BLS said.
"Firms are adding workers, creating new positions, and increasing compensation to attract better applicants and keep their best performers", said Chief Economist Bill Dunkelberg. Given that, it seems questionable at bet for the Federal Reserve to be putting the economic brakes on via more interest rates.