Published: Sat, June 03, 2017
Markets | By Terence Owen

US employers add modest 138K jobs; rate dips to 4.3 percent

US employers add modest 138K jobs; rate dips to 4.3 percent

The ADP National Employment Report showed private payrolls increased by 253,000 jobs last month, beating economists' expectations for a gain of 185,000 jobs.

Also discouraging is that job gains for March and April were revised down by 66,000.

For the year to date, the economy has added +810,000 new jobs, which means average job creation for the year so far now stands at 162,000 per month.

"Even though job growth slowed, it's still well above where it needs to be to keep up with the working-age population growth", said Jed Kolko, chief economist at Indeed, an online recruiting site.

The 2016 May jobs report stunned everyone when the US only added 38,000 jobs (it was later revised up a little).

Even with the tightening labor market, wage growth is still slower than expected considering the low unemployment rate - with only 2.5 percent growth over the past year. But the rate declined mainly because people stopped looking for work last month and so were no longer counted as unemployed. That's been the case in recent months, but revisions to past reports also suggests that the labor market may not be as strong as it once seemed.

The closely watched employment report was released less than two weeks before the Fed's June 13-14 policy meeting.

Total nonfarm payroll employment increased by 138,000 in May, compared with an average monthly gain of 181,000 over the prior 12 months.

Taken as a whole, the jobs report could give the Fed more confidence to raise rates by a quarter percentage point at its meeting later this month. The Atlanta Fed is forecasting GDP increasing at a 3.4 percent pace in the second quarter.

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Another month of mediocre wage growth is further evidence.

Annual growth in average hourly earnings was a so-so 2.6 percent in April.

In May, the average hourly earnings rose 4 cents to 26.22 US dollars. But with the labor market expected to hit full employment this year, there is optimism that wage growth will accelerate.

"Some of this is due to businesses finding it more hard to locate workers with the right skills as the labor market gets tighter", Faucher and Hoffman said. Manufacturers of food and fabricated metals products reported difficulties finding qualified workers.

But unlike in March, when weak job growth was accompanied by a growing labor force, May's report was disappointing across the board.

It had declined for two consecutive months as concerns mounted in the business community that political scandals could derail the Trump administration's economic agenda, including its push to cut corporate and individual taxes. 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.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the United States economy.

Construction added 11,000 jobs in May, with 7,200 of them in heavy and civl engineering, and 5,500 in building construction.

"The loss of manufacturing jobs in May is a stark reminder of the challenges that face factory workers: declining auto sales, a persistently high goods trade deficit, and muddled fiscal policies", said Alliance for American Manufacturing President Scott Paul in a statement. For those who think the economy is close to capacity, last month's gains were solid.

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