US Job Growth Slows in May

Unemployment rate falls to lowest level since 2001

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Jun 02, 2017
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When unemployment figures for April were released by the Labor Department, job gains were enough at the time to renew talk of an increase in interest rates when the Federal Open Market Committee (FOMC) meets in mid-June.

In the context of those numbers, Friday’s report was disappointing. Job growth slowed in May, but the gains from April may still be adequate to justify a rate increase. Between 75,000 and 100,000 jobs need to be created each month to keep pace with the expansion of the working-age population. Nonfarm payroll jobs were up 138,000 in May, nearly 50,000 fewer jobs than economists had anticipated. On top of that, job increases for March and April were revised downward by a total of 66,000.

“The runway is now clear for the Federal Reserve to raise benchmark interest rates,” wrote The New York Times.

The monthly unemployment numbers only tell part of the story, CNBC observed.

“The official unemployment rate is defined as ‘total unemployed as a percent of the civilian labor force’ but doesn't include a number of employment situations in which workers may find themselves,” CNBC’s Eric Chemi wrote. “The U-6 rate is defined as all unemployed ‘plus all persons marginally attached to the labor force plus total employed part time for economic reasons as a percent of the civilian labor force.’ In other words: the unemployed, the underemployed and the discouraged.”

The U-6 rate fell two-tenths of a percentage point to 8.4%, its lowest level since mid-2007.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) told The Hill that the numbers reinforce the position that tax reform is a key to job and economic growth.

“As our committee has heard from business leaders over the past few weeks, permanent, pro-growth tax reform is the most important opportunity we have to help job creators hire more workers, increase paychecks and reinvest in our local communities,” Brady said.

While May’s numbers paled in comparison to April’s, they were adequate to bring the unemployment rate down one-tenth of a percentage point to 4.3%, a level not seen since May 2001 although, as Reuters observes, a factor to bear in mind is that 429,000 people of working age withdrew from the labor force last month.

At the depths of the 2008-2009 recession, unemployment exceeded 10%. The unemployment rate has dropped 0.5% since the start of the year.

For those with jobs, average hourly earnings went up 0.2% according to numbers that were released Friday, resulting in a 2.5% year-over-year increase.