U.S. employers add modest 138,000 jobs; unemployment rate dips to 4.3%
U.S. employers pulled back on hiring in May by adding only 138,000 jobs, though hiring was still enough to help nudge the unemployment rate down to a 16 year-low.
The Labor Department said Friday that the jobless rate fell to 4.3 per cent the lowest level since 2001, from 4.4 per cent. Still, the rate declined mainly for a less-than-encouraging reason: People stopped looking for work in May and so were no longer counted as unemployed.
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. Besides the hiring slowdown in May, the government on Friday revised down its estimate of job growth in March and April by a combined 66,000. Monthly job gains have averaged 121,000 over the past three months, compared with 181,000 over the past 12 months.
Employers are now choosing from among a smaller pool of job applicants, and some are having trouble finding people with the skills they need. Average hourly earnings have risen a middling 2.5 per cent over the past year.
"Given reports that job openings are near all-time highs, it suggests that businesses are struggling to fill these positions," said Beth Ann Bovino, U.S. chief economist for S&P Global Ratings.
Rate hike could be coming
Still, most analysts think job growth is solid enough for the Federal Reserve to feel confident enough to raise interest rates again when it meets in two weeks.
And there were some bright spots in May's jobs report. Restaurants and health care companies posted solid gains. Food services added 30,300 workers, health care 24,300. Construction added 11,000. As energy prices stabilize somewhat, the mining sector — which includes oil, natural gas, coal and metal ore — added 6,600 jobs.
But governments, manufacturers and retailers lost workers.
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Despite the slowdown in job growth, the U.S. economy is running neither too hot nor too cold, with growth holding at a tepid but far from recessionary 2 per cent annual rate. Few economists foresee another downturn looming, in part because the recovery from the recession has been steady but grinding, with little sign of the sort of overheated pressures that normally trigger a recession.
The government's monthly jobs report produces a net gain by estimating how many jobs were created and comparing that figure with how many it estimates were lost. If hiring maintains its current pace, it would exceed population growth, and the unemployment rate should eventually fall even further below its current 4.3 per cent, a level associated with a healthy economy.
An influx of job seekers can inflict a drag on pay growth. As more people start seeking jobs, employers begin to have less incentive to raise pay. It's only when employers face a shallow pool of job applicants that they tend to feel compelled to raise pay in hopes of hiring people who fit their needs.