U.S. Unemployment Rate Falls to the Lowest Level Since April 2000
The U.S. Bureau of Labor Statistics (BLS) said U.S. economy added a stronger than expected 223,000 in May and the unemployment rate ticked down to 3.8%, the lowest level since April 2000. It’s also a match for the lowest rate in half a century.
Worth noting, the unemployment rate for Hispanics and African Americans are both just 0.1% off their all-time lows.
The labor force participation rate, at 62.7%, and the less-cited but arguably more important employment-population ratio, at 60.4%, was largely unchanged in May. The U-6, which includes all persons marginally attached to the labor force plus total employed part time for economic reasons, has fallen from 8.4% since May 2017.
“The U-6 rate continues to gradually ratchet lower coming in at 7.6% versus 7.8% in April,” TJM Investments analyst Tim Anderson said. “The report shows strong job growth with only moderate wage inflation, so far.”
Employment continued to trend up in several industries that trended down under the previous administration including construction (+25,000), manufacturing (+18,000) and mining (+6,000). The higher-paying jobs are continuing to put pressure on wages.
Construction has added a whopping 286,000 jobs over the past 12 months. Manufacturing has added 259,000 jobs over the year, a complete reversal from a negative trend. Mining has added 91,000 jobs over the year, also a complete reversal from the all-time low in October 2016.
Retail trade added 31,000 jobs, with gains occurring in general merchandise stores (+13,000) and in building material and garden supply stores (+6,000). Over the past 12 months, retail trade has added 125,000 jobs.
Wages rose by an amount that fell at the higher end of the forecast range, both on a monthly and an annual basis.
In May, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents to $26.92. Over the year, average hourly earnings have increased by a more solid 71 cents, or 2.7%. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.59 in May.
Also This Week: Personal Income and Outlays: Wages, Consumer Spending Gain
The strength in the report also signals to analysts that the Federal Reserve is almost certain to continue to raise rates this year.
“This report is very consistent with what we have been seeing from the FED minutes and Beige book on regional economic activity,” Mr. Anderson said. “It’s now a lock that we will have a 25 basis point hike in June and at least 1 more hike some time in the second half of 2018, possibly 2.”
The BLS jobs report, or Employment Situation, follows the ADP National Employment Report released Wednesday, which showed the U.S. private sector added 178,000 jobs in May. ADP, which is derived from actual payroll data, measures the change in total non-farm private sector employment each month on a seasonally-adjusted basis.
The Labor Department (DOL) via the BLS tallies both the private and public sectors.
The change in total nonfarm payroll employment for March was revised up from +135,000 to +155,000, and the change for April was revised down from +164,000 to +159,000. With these revisions, employment gains in March and April combined were 15,000 more than previously reported.
“Job gains averaged 180,000 a month over the last 3 months, and that includes the disappointing report from March,” Mr. Anderson added. “That month was just revised higher by 20,000.”