US private employers stepped up hiring in May, signaling that the labor market was rapidly tightening amid a firming economy, which could encourage the Federal Reserve to raise interest rates later this month. The US unemployment rate fell to 4.3% in May, the lowest since 2001 (pdf).
"Today's jobs report reflects that the labor market is tightening, and there's not as much room for slack as the economy reaches full employment....it's tough to continue to add 200,000 jobs each month with our unemployment rate below 5%", said Steve Rick, chief economist at CUNA Mutual Group, reports Fox Business.
Total nonfarm payroll employment increased by 138,000 in May, compared with an average monthly gain of 181,000 over the prior 12 months. A broad measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they can not find full-time employment, fell two-tenths of a percentage point to 8.4 percent, the lowest since November 2007. Over the past year, average hourly earnings have risen by 63 cents, or 2.5%.
The jobs numbers probably clear the path for the Federal Reserve to raise interest rates later this month.
Manufacturing employment fell by 1,000 jobs last month as payrolls in the automobile sector dropped 1,500 amid falling sales.
But governments, governments shed 9,000 workers, with the losses concentrated at the state and local level.
Layoffs also are at 40-year lows, and analysts say companies fear they may not be able to replace workers they let go. Retailers trimmed their ranks by 6,100 jobs.
Meanwhile, minutes of the Fed's May 2-3 policy meeting, which were published last week, showed that while policymakers agreed they should hold off hiking rates until there was evidence the growth slowdown was transitory, "most participants" believed "it would soon be appropriate" to raise borrowing costs. The government cut its estimate of new jobs created in April to 174,000 from 211,000. If hiring maintains its current pace, it would exceed population growth, and the unemployment rate should eventually fall even further.
An influx of job seekers can inflict a drag on pay growth. But it is worth paying close attention to the industry's direction; there are almost 16 million retail jobs in the U.S. Manufacturing, which tends to get far more attention from politicians, employs 12 million people.
The decline in that measure is an encouraging sign that jobless people who had given up hope of working are now being hired.
By comparison, the USA added 615,000 jobs between February and April of past year, and 586,000 jobs in 2015. Workers generally enjoy higher incomes once they generate more value per hour on the job.
"We're not seeing a lot of upward pressure on hourly wages", said Mark de Gorter, the chief operating officer.
Job growth in health care has averaged 22,000 per month thus far in 2017, compared with an average monthly gain of 32,000 in 2016. And whatever meaningful pay raises that exist are going disproportionately to managers and supervisors.
Pay gains may be weak in part because one crucial ingredient for economic growth - worker productivity - has been sluggish. Many people who had stopped looking for jobs are coming off the sidelines to find them. It has dropped five-tenths of a percentage point this year.