The United States economy created 138,00 jobs in the month of May while the unemployment rate ticked lower from 4.4% to 4.3%. The job growth was somewhat disappointing and falls short of the number needed to grow the economy in the long-term. In April, 174,000 jobs were created and an average of 164,000 jobs per month have been created so far this year. Health care continued to be a large net job creator, with 32,000 jobs, or about a quarter of the total, in May. Falling just short of that was an increase of 31,000 jobs in the travel and leisure industry.
Government jobs were particularly weak, shedding a net 9,000, with potentially more cuts looming as President Trump attempts to shrink the size of the federal government.
Despite the weaker than expected number of new jobs, the unemployment rate at 4.3% continues to sit at a sixteen year low. The last time the figure was this low was in May 2001. Some have suggested that a dearth of qualified employees at this point in the expansion is a major reason for the hiring slowdown. Still, were that to be the case it would be expected that wages would begin rising at a more rapid pace. That has not happened, as the average wage in May was only +2.5% higher than the previous year, consistent with where wage growth has been for some time.
Until more data becomes available, it is unlikely that the jobs number will materially influence Federal Reserve Policy, which is set to continue tightening for the remainder of the year, including an interest rate increase later this month. For that to change, a large change to trend would have to seen in GDP growth, inflation, or both. The increase in June would push the benchmark rate to between 1% and 1.25%, still low by historical standards. Statements by Fed officials indicate that they continue to believe the softer data to be a temporary blip.